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Bitcoin ETF Success Stirs Democrat Unease—Could It Jeopardize ETH ETF Approval?

Last Updated March 15, 2024 4:21 PM
Shraddha Sharma
Last Updated March 15, 2024 4:21 PM
By Shraddha Sharma
Verified by Peter Henn

Key Takeaways

  • Democratic Senators urge SEC to halt future crypto ETF approvals.
  • Bloomberg analysts question the source of the senators’ data.
  • There might be potential challenges for Ethereum ETF approval.

The success of Bitcoin exchange-traded funds (ETFs) has led to a wave of concern among Democratic leaders. In a letter to the SEC chairman Gary Gensler, two senators highlighted risks to retail investors due to crypto-based ETPs. Their questioning can have potential implications for the approval of Ethereum ETFs. This is especially true when the concerns are right before the 2024 presidential elections in the US.

Senators’ Warning Against Crypto ETFs

Senators Jack Reed and Laphonza Butler have formally requested Gary Gensler, the chair of the Securities and Exchange Commission (SEC), to reconsider the approval of further crypto ETFs. Their concern is based on the perceived dangers these products pose to retail investors. In the letter, they mention that thinly traded cryptocurrencies could fall prey to market manipulation and fraudulent activities.

The letter notes: “The SEC’s approvals have provided a green light for Wall Street to sell volatile cryptocurrency investments to ordinary Americans through their brokerage and retirement accounts.”

The positive reception of spot Bitcoin ETFs seems to have unsettled some high-ranking Democrats, suggested Paradigm’s Alexander Grieve. The potential debate emerges before the Ethereum ETF deadline in May and the 2024 presidential elections due in November.

 The letter cited an investigation by the Financial Industry Regulatory Authority (FINRA). The report said stock brokers didn’t follow disclosure rules for giving clear and honest information about 70% of the time.

The Senators said: “These alarming deficiencies raise significant concerns that brokers and advisers may now provide incomplete or deceptive information about bitcoin ETPs to retail investors.”

Where is the Skepticism Coming From?

Bloomberg analysts, James Seyffart and Eric Balchunas, have raised  questions about the Senators’ motivations and the origins of their data. Seyffart points out the difficulty in conducting the type of analysis mentioned by the senators. As a result, there is the possibility of external influence.

Meanwhile, Pointsville founder Gabor Gurbacs cites the analytical capabilities of the Fed and the SEC, implying that these institutions might be the real sources behind the concerns raised in the letter.

At the same time, Balchunas links unease among Democrats to the success of Bitcoin ETFs, suggesting it has led to “buyer’s remorse”. Meanwhile, the mention of disparities between Ethereum futures and spot markets by the senators is a potential indicator the SEC may have provided them with data. Therefore, it could be that the SEC will reject the Ethereum ETF applications.

Ethereum ETF Decision Hangs in Balance

The debate surrounding the approval of crypto ETFs, sparked by the success of Bitcoin ETFs, has made the decision on ETH ETFs difficult. While Democratic senators voice concerns, the future of Ethereum ETFs hangs in the balance.

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