The U.S. Securities and Exchange Commission's (SEC) recent adoption of new guidelines is poised to significantly speed up the approval process for new cryptocurrency Exchange-Traded Funds (ETFs), potentially revolutionizing the landscape for crypto-based investment products. This move marks a significant shift from the SEC's previous approach, which involved lengthy, case-by-case reviews for each product.

Key Changes in the SEC's Approach

The new rules introduce standardized listing criteria, aimed at expediting the launch of spot ETFs and attracting more institutional capital. The main listing criteria for a crypto ETF will be the existence of a futures market for the underlying asset on a regulated exchange for at least six months. Here are the key changes:

• Expedited Approval Process: The new rules dramatically reduce the approval time for crypto ETFs from up to 270 days to 75 days or less.
• Predetermined Criteria: Products meeting specific predetermined criteria can now launch without lengthy case-by-case approval processes.
• Increased Efficiency: This streamlined approach aims to enhance efficiency in bringing crypto ETFs to market.
• Generic Listing Standards: The SEC has approved generic listing standards for commodity-based exchange-traded products, fast-tracking the approval for crypto funds. By approving the standards across Nasdaq, Cboe BZX, and NYSE Arca, the SEC has eliminated the need for individual approvals under Section 19(b) of the Securities Exchange Act of 1934.

Impact on the Crypto ETF Market

The SEC's decision has already sparked a flurry of activity in the crypto ETF space:

• Surge in Applications: Asset managers have filed approximately a dozen applications, with more expected in the coming weeks. Steven McClurg, founder of Canary Capital Group, told Reuters that his firm has “about a dozen filings with the SEC now, and more coming,” adding that the industry is preparing for “a wave of launches”.
• Anticipated Launches: Analysts predict that the first products under the new rules, likely Solana and XRP ETFs, could debut as early as October.
• Existing Crypto ETFs: There are currently 21 U.S. ETFs that hold Bitcoin or Ethereum, with numerous new filings pending for products tied to less mainstream digital assets. The new standards came with the approval of the first multi-crypto asset ETF in the U.S., the Grayscale Digital Large Cap Fund, or GLDC, which in addition to crypto and ether holds XRP, solana and cardano.

Criteria for Expedited Approval

To qualify for the accelerated approval process, crypto ETFs must meet specific criteria:

• Trading on regulated markets.
• Having CFTC-regulated futures contracts for at least six months.
• Existence of another ETF with 40% or more assets in the cryptocurrency itself.
• If a proposed ETF's underlying coin already trades on a regulated market or has CFTC-regulated futures contracts that have traded for at least six months, it qualifies for expedited approval.

Looking Ahead

The SEC's new framework for the crypto ETF approval process represents a procedural step forward in cryptocurrency regulation. By providing clearer guidelines and potentially streamlining approval timelines, the regulator appears to be responding to the growing demand for crypto investment products.

Tokens such as SOL, XRP, and DOGE, which have existing futures and ETF filings, are anticipated to benefit from these developments.