Democrats Ask SEC's Gensler to Block Approval of More Crypto ETPs
Democrats Want Gensler of the SEC to Stop More Crypto ETP Approval
Senators claim that small order books for several cryptocurrencies put regular investors at "enormous risks" when it comes to these goods.
By means of Sam Reynolds
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At 8:16 a.m. UTC on March 15, 2024
Updated at 8:21 a.m. UTC on March 15, 2024
Gary Gensler, the chair of the US Securities and Exchange Commission (Jesse Hamilton/CoinDesk)
Gary Gensler, the chair of the US Securities and Exchange Commission (Jesse Hamilton/CoinDesk)
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Citing dangers from inadequate disclosure and insufficient liquidity, Senators Jack Reed and Laphonza Butler call on the SEC to prohibit cryptocurrency ETPs.
Paul Grewal of Coinbase counters, emphasizing ether's substantial trade volume and The part that cryptocurrency plays in modernizing finance.
To shield individual investors from the risks associated with inadequate broker disclosure and limited liquidity in major cryptocurrencies, two Democratic senators are pleading with the Securities and Exchange Commission (SEC) to prohibit the sale of any additional cryptocurrency exchange-traded products (ETPs).
Sens. Jack Reed (D-RI) and Laphonza Butler (D-CA) write that 70% of broker communications with regular investors were found to breach fair disclosure regulations, according to a FINRA survey.
They stated, "In certain communications, brokers misrepresented the risks associated with cryptocurrencies; in others, they incorrectly equated cryptocurrencies with cash." "These concerning shortcomings raise serious concerns that retail investors may now receive misleading and incomplete information about bitcoin ETPs from brokers and advisers."
Also, the Senators contend that by designating exchange-traded funds for bitcoin as such, the name "obscures significant aspects of these investments."
"Investment Company Act of 1940 protections for bitcoin are not the same as those for ETFs that hold shares of different companies," the letter stated. "Retail investors should be made aware of how these ETPs differ from more common funds which they may have experience with."
The two senators also claim that other cryptocurrencies are significantly more prone to wrongdoing and that bitcoin (BTC), which they refer to as the most well-known and closely watched cryptocurrency, is showing signs of vulnerability.
They stated, "We do not think other cryptocurrencies exhibit the trading volumes or integrity to support related ETPs." "ETPs present significant risks for retail investors as their prices are particularly vulnerable to fraudulent schemes such as pump and dump."
The Coinbase Paul Grewal, chief legal officer, authored a piece on X.
Grewal noted that the trading volume of ether (ETH), which is anticipated to be the next digital asset to be included in an ETF, is more than that of numerous S&P 500 equities.
He wrote, "ETH has a deep and liquid spot market." Grewal said, "Only one S&P 500 stock has lower adjusted bid-ask spreads." Coinbase had responded to the senators' concerns in a 27-page letter to the SEC, addressing their concerns.
"Crypto is a crucial component in modernizing our financial system for all individuals," he said in closing.
