Senators urge SEC’s Gensler to abstain from authorizing further crypto ETFs

Two US senators, Jack Reed and Laphonza Butler, have called on Gary Gensler to halt the approval of any further cryptocurrency exchange-traded funds (ETFs). In a letter dated March 11, the Democratic senators argued that approving crypto ETFs would expose retail investors to high risks in thinly traded markets prone to fraud and manipulation. Currently, there are eight proposed applications for spot Ether ETFs awaiting approval from the Securities and Exchange Commission (SEC), with hopes that other altcoins could follow suit. Reed and Butler also urged the SEC to exercise further oversight on Bitcoin ETFs, cautioning against using the recent approval of spot Bitcoin ETFs as a precedent for future approvals. They emphasized that while the Bitcoin market has shown some weaknesses, it is more established and closely monitored compared to smaller cryptocurrencies. The senators also called for additional regulatory scrutiny on Bitcoin ETF brokers and advisors. Alexander Grieve, the government relations lead at Paradigm, a crypto venture capital firm, noted that the success of spot Bitcoin ETFs has caused some concern among politicians. This mounting political pressure on Gensler could make the approval of an Ether ETF in May less likely. The letter from Reed and Butler is seen as evidence of this pressure. In a post on March 15, Balchunas expressed pessimism about the chances of a spot Ether ETF approval in May, citing the backlash from high-ranking Democrats as a contributing factor. In December 2021, Butler co-sponsored Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act bill, which aims to crack down on cryptocurrency in the US. Reed also sponsored a bipartisan bill in July that seeks to strengthen regulations and sanctions requirements for decentralized finance.