The US Securities and Exchange Commission (SEC) has recently acknowledged several cryptocurrency exchange-traded fund (ETF) filings, indicating a potential shift in its regulatory stance. The regulatory submissions, dated February 19 and 20, highlight the SEC’s openness to exploring new crypto ETF products, including staking, options, in-kind redemptions, and altcoin-focused funds.
Details of the Latest ETF Filings
According to the filings submitted by securities exchanges Nasdaq ISE and Cboe BZX, the proposed rule changes seek approval for various crypto ETF offerings. Notably, Nasdaq’s submission pertains to position and exercise limits on options tied to BlackRock’s iShares Bitcoin Trust (IBIT), which is the most popular spot crypto ETF, managing nearly $57 billion in net assets.
Meanwhile, Cboe has filed for the listing of options on Grayscale’s and Bitwise’s Ether ETFs. Although the SEC has previously approved options on Bitcoin ETFs, it has yet to greenlight options on Ether ETFs. Additionally, Cboe seeks permission to list XRP ETFs proposed by Canary and WisdomTree, support in-kind creations and redemptions for Fidelity’s Bitcoin and Ether ETFs, and enable 21Shares’ Ether ETF to stake a portion of its ETH holdings to generate additional yield.
Changing Regulatory Landscape Under Trump’s Second Term
The SEC’s recent acknowledgments reflect a noticeable shift in its approach to crypto ETFs since President Donald Trump began his second term on January 20. Analysts suggest that this change in regulatory stance could pave the way for more crypto ETF approvals in 2025.
This trend is already evident, as two cryptocurrency index ETFs were launched in February. Franklin Templeton introduced an ETF holding spot Bitcoin and Ether on February 20, while asset manager Hashdex launched its Nasdaq Crypto Index US ETF (NCIQ) on February 14.
Focus on Staking and In-Kind Redemptions
The SEC’s interest in staking has gained attention within the industry. According to Fox Business reporter Eleanor Terrett, the SEC is “very, very interested” in staking and has requested industry stakeholders to draft a memo outlining the different types of staking and their potential benefits. Terrett noted that her source expects agency guidance on staking to be issued soon, given the SEC’s active engagement on the subject.
In-kind creations and redemptions, a mechanism where ETFs swap shares for a basket of underlying assets, are also under consideration. This process is more tax efficient and favored by most ETF issuers and investors. Although the SEC has not yet permitted in-kind redemptions for spot cryptocurrency ETFs, Cboe’s filings indicate growing interest in this area.
Prospects for Altcoin ETFs and Market Developments
Bloomberg Intelligence estimates a 65% chance of XRP ETF approval in the US, with even higher odds for Litecoin and Solana ETFs at 90% and 70%, respectively. On February 14, the SEC acknowledged Cboe’s request to list 21Shares’ XRP ETF, signaling a more favorable outlook for altcoin ETFs.
Additionally, on February 19, Coinbase launched SOL futures contracts on its regulated US derivatives exchange, bolstering the ecosystem for potential Solana ETFs. Analysts believe that strong futures markets provide a stable benchmark for asset prices, thereby supporting cryptocurrency ETF applications.
