The Securities and Exchange Commission (SEC) has recently approved new, generic listing standards for commodity-based Exchange Traded Products (ETPs), which include those tied to cryptocurrencies. This move is expected to significantly streamline the approval process for crypto ETFs, potentially leading to a surge in new products and greater access for investors to the crypto market.

The Old and the New: A Faster Route to Market

Previously, each crypto ETF required individual approval from the SEC, a process that could be lengthy and unpredictable, often taking up to 240 days or more. Under the new rules, exchanges like the NYSE, Nasdaq, and Cboe can list crypto ETFs directly if they meet certain pre-defined requirements, without waiting months for SEC sign-off. This streamlined approach is expected to reduce the maximum time from filing to launch to 75 days or less.

SEC Chairman Paul Atkins stated that this new approval helps maximize investor choice and foster innovation by streamlining the listing process and reducing barriers to access digital asset products within America's trusted capital markets.

What's Required for the Fast Track?

To qualify for this expedited listing, a crypto asset must meet at least one of the following conditions:

• Be traded on a market that is part of the Intermarket Surveillance Group.
• Have a futures contract listed for at least six months on a Commodity Futures Trading Commission (CFTC)-regulated market.
• Be included in an ETF with at least 40% exposure already trading on a national exchange.

Bloomberg analyst James Seyffart noted that the main listing criteria for a crypto ETF will be the existence of a futures market for the underlying asset on a regulated exchange, such as Coinbase, for at least six months. Crypto ETF offerings that don't meet these requirements can still pursue the traditional approval process through individual filings.

Impact on the Crypto Market

This policy shift is expected to have several significant impacts on the crypto market:

• Increased ETF Listings: Experts predict a surge in spot crypto ETP launches. Steven McClurg, founder of Canary Capital Group, stated his firm has about a dozen filings with the SEC now, with more coming, signaling the industry is preparing for a wave of launches.
• Greater Altcoin Exposure: The new rules pave the way for ETFs beyond Bitcoin and Ether, potentially including those based on Solana, XRP, Dogecoin, and others. Galaxy, a digital assets platform, says that 10 tokens currently meet the criteria for expedited listing, including Bitcoin, Dogecoin, Solana, Litecoin, Chainlink, Stellar, Avalanche, Shiba Inu, Polkadot, and Hedera.
• Improved Liquidity: The influx of new crypto ETFs is expected to bring more capital into altcoins and improve overall market liquidity.
• Mainstream Adoption: By making crypto investments more accessible through traditional investment vehicles, the new rules could encourage greater mainstream adoption of digital assets.
• Institutional Investment: Crypto ETFs offer a regulated and accessible avenue for institutional investors who may have been hesitant due to the lack of traditional investment vehicles. Institutional players have the resources and influence to drive substantial capital into digital assets, potentially leading to price spikes.

Hashdex and Grayscale Lead the Way

Following the SEC's announcement, Hashdex expanded its Crypto Index US ETF (NCIQ) to include XRP, SOL, and Stellar, in addition to Bitcoin and Ether. The SEC also approved the Grayscale Digital Large Cap Fund, the first U.S. multi-asset crypto ETF, which includes BTC, ETH, XRP, SOL, and Cardano.

A Shift in Regulatory Approach

The SEC's move towards generic listing standards signals a potential shift from "regulation by enforcement" to "regulation by common sense," providing clearer rules for innovators in the crypto space. This change is viewed by the crypto industry as a step forward for continued regulatory clarity.

Potential Challenges and Considerations

While the new rules are widely seen as positive, some challenges and considerations remain:

• Not all filings will meet the new criteria: Kyle DaCruz, head of digital assets at VanEck, noted that not all existing filings qualify.
• Approval does not guarantee inflows: Market analysts caution that approval alone does not guarantee significant capital inflows.
• Market Volatility: The potential for increased market volatility remains a concern.

Despite these challenges, the SEC's new ETF approval shortcut represents a significant step forward for the crypto industry, potentially unlocking new opportunities for innovation, investment, and mainstream adoption.