Encryption ETF Regulatory New Landscape: US SEC Approves Physical Redemption, Universal Listing Standards Imminent

The US encryption ETF market is undergoing a significant turning point. Regulatory agencies have recently taken a series of measures to pave the way for encryption assets to enter the mainstream financial market. These changes not only enhance the operational efficiency of existing products but also create conditions for the rapid listing of more encryption asset ETFs in the future.

SEC Approves Encryption ETP Physical Redemption Mechanism

On July 30, the SEC made an important decision to allow authorized participants to use physical methods to subscribe and redeem encryption ETPs. This move addresses many issues previously associated with the cash subscription and redemption model, such as high trading costs, settlement delays, and market slippage risks.

The introduction of the physical redemption mechanism means that authorized participants can directly create or redeem ETF shares using Bitcoin or Ethereum, greatly improving operational efficiency. This change not only strengthens the connection between encryption assets and traditional financial products but also provides new compliant liquidity channels for encryption assets, which is expected to attract more institutions to participate in the ETF market.

The SEC Chairman stated that this approval will help reduce product costs, improve operational efficiency, and ultimately benefit investors. He emphasized that this is an important step towards establishing a rational and clear encryption regulatory framework.

In addition, the SEC has also approved other proposals to promote the development of the encryption asset market, including the listing trading application for hybrid spot Bitcoin and Ethereum ETPs, specific Bitcoin spot ETP options trading, flexible exchange options trading, and raising the position limits for specific Bitcoin ETP options. These measures enrich market tools and enhance trading flexibility.

The general listing standards for encryption ETP are about to be released

Recently, an exchange submitted a milestone rule amendment proposal to the SEC aimed at establishing a universal listing standard for Commodity-Based Trust Shares (CBTS). If approved, this proposal will open an efficient and transparent listing channel for commodity ETPs, including encryption assets.

The new proposal comprehensively upgrades the definition of CBTS, breaking through the original limitation of a single commodity. The new regulations allow trust shares to be issued by trusts, limited liability companies, or other similar entities, significantly enhancing flexibility. The scope of assets has also been expanded to include various commodities, commodity underlying assets, securities, cash, and cash equivalents.

The proposal also clarifies three types of underlying asset pathways that can be directly listed: ISG market trading, designated contract market trading for more than 6 months, and a share of over 40% in already listed ETFs. These pathways effectively anchor the liquidity, compliance, and regulatory visibility of assets, forming a unified and transparent "listing is admission" mechanism.

It is worth noting that the new regulations also support the encryption staking mechanism, as long as the ETF can ensure sufficient liquidity or establish a robust staking risk control system, the staking mechanism can be legally introduced into the encryption ETF product structure.

According to industry insiders, this regulation may be finalized in less than 60 days. Once passed, it will open up an efficient and transparent listing channel for commodity ETPs, including encryption assets.

Opportunities Brought by New Regulations

The introduction of new regulations will bring opportunities for multiple parties. Firstly, a certain trading platform may become the "certification center" for altcoins to access ETFs, as long as a certain asset's futures have more than 6 months of compliant trading records on its derivatives exchange, it qualifies for general listing.

Secondly, the Commodity Futures Trading Commission (CFTC) will play a more important role in the approval of future encryption ETFs. The new regulations clearly state that CBTS products must be subject to the CFTC's regulatory framework, which means that the CFTC will influence the eligibility of ETFs by controlling the listing of futures.

Finally, the new regulations will promote the rapid approval and listing of more altcoin ETFs. According to analysts' predictions, there are currently more than ten encryption assets that meet the new standards and may be approved in September or October this year. In addition, some pending ETP applications, such as those for Solana and XRP, are also expected to be launched in the fourth quarter, potentially including physical delivery and staking yield functions.

These changes mark the arrival of new development opportunities for the US encryption ETF market, providing more possibilities for encryption assets to enter the mainstream financial market.