Two decisions made by the Securities and Exchange Commission in recent days could unleash a wave of new exchange-traded fund launches, let by crypto ETFs.
The SEC recently approved generic listing standards for spot crypto ETFs, which removes the need for lengthy case-by-case approvals. This means faster launches across more cryptocurrencies.
The regulatory door is now open for a wider range of crypto ETFs beyond existing bitcoin and ethereum funds, which have grown quickly. Digital currencies with smaller but loyal followings could soon be better represented and traded by investors though exchange-traded funds.
“Within the next 60 to 90 days, we’ll have a dozen or so new crypto-oriented products tracking things like solana or XRP, or the coins that people don’t know about that are below bitcoin and ethereum, the ones everybody knows,” said ETF expert David Nadig on CNBC’s “ETF Edge” on Monday.
There are already a handful of solana and XRP ETFs, with relatively low asset bases. The Solana ETF, for example, has $230 million in assets, according to ETFAction.com. The Volatility Shares Trust XRP has roughly $200 million in assets.
Crypto-linked investment strategies are also widening in scope beyond straight single-currency spot market trades, such as new bitcoin income ETFs. Crypto “index ETFs” are also launching, among them, Grayscale Investments recently being approved by the SEC to convert a mutual fund to ETF status.
Biggest crypto ETFs
iShares Bitcoin Trust: $84 billion
Fidelity Wise Origin Bitcoin Fund: $22 billion
Grayscale Bitcoin Trust: $19 billion
iShares Ethereum Trust: $15 billion
Source: ETFAction.com, as of 9/30
The anticipated ETF boom will extend well beyond crypto. On Monday, the SEC granted what is expected to be the first in a wave of regulatory greenlights to traditional mutual fund companies to offer their portfolios with an ETF share class. Dimensional Fund Advisors became the first asset manager to win this approval.
More than 70 fund providers have applications pending and experts expect the rest to follow quickly now that Dimensional has cleared the way.
Shelly Antoniewicz, lead ETF researcher and chief economist at mutual fund trade group Investment Company Institute, recently told the “ETF Edge” podcast that in addition to the 70 applications already on file with the SEC, “we’ve been working with hundreds to be prepared for if and when the SEC exemptive relief is allowed.”
According to YCharts, there are around 4,100 ETFs, which is more than the amount of individual stocks listed on U.S. markets, but that could increase by as many as 3,000 more ETFs, Nadig told “ETF Edge” back in May when discussing the highly anticipated SEC change.
Taking strategies from mutual fund wrappers and making them available in ETFs offers new trading flexibility, but also risks for investors.
“It means they’re going to be a whole lot of new tickers you’ve got to worry about,” Nadig said on ETF Edge on Monday.
He noted some tax advantages from the more flexible ETF structure may exist for existing shareholders, but the bigger story is the product proliferation.
“Two big regulatory changes, both of them opening the floodgates on new products for investors,” Nadig said.
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