Major crypto industry participants have urged the US Securities and Exchange Commission to avoid broad restrictions on novel exchange-traded funds, instead advocating for case-by-case evaluation of products based on their individual characteristics.
In letters dated August 31 and submitted during the SEC's 60-day public comment period, venture capital firm a16z, digital asset investment manager Grayscale, and the Crypto Council for Innovation (CCI) outlined their concerns about potential regulatory changes.
Industry Positions on ETF Regulation
The three organizations opposed applying blanket categorical rules that would automatically classify products under the Investment Company Act of 1940. Instead, they argued that established digital asset products with proven compliance records should not face new requirements simply because they are labeled as novel.
a16z specifically argued that crypto-based exchange-traded products now operate with developed market infrastructure, including exchange-approved listing standards and established disclosure requirements. The firm recommended that the SEC evaluate such products according to their underlying characteristics rather than grouping them with products holding private assets or using other novel strategies.
Grayscale supported optional confidential pre-filing processes, while CCI called for comparable regulatory efficiencies across ETFs and non-ETF exchange-traded products while preserving existing investor protections.
Differing Approaches on Classification
The commenters proposed different solutions for the regulatory framework. a16z suggested that the ETF label should be reserved for funds operating under the Investment Company Act of 1940, while Grayscale argued the term should describe economic characteristics regardless of the legal structure used.
CCI recommended that the SEC create clearer registration-status disclosures rather than fundamentally restructuring the current approval process.
The SEC opened its consultation on next-generation ETFs on June 30, seeking public feedback on whether existing regulations are adequate and what changes to the registration process may be necessary.
