US Crypto ETFs Get the Regulatory Green Light: Common Listing Standards May Be Implemented Within 60 Days, Which Projects Will Become Winners?

Author: Nancy, PANews

US crypto ETFs have received the regulatory green light, and the market may usher in a new round of listings. On the one hand, the US SEC has officially approved the physical subscription and redemption mechanism for crypto ETFs, significantly improving trading efficiency and market liquidity. On the other hand, universal crypto ETP listing standards are about to be released, which will open a fast track for crypto assets to enter the ETF market.

SEC Officially Approves Physical Subscriptions and Redemptions for Crypto ETPs

Crypto regulation is approaching a major turning point. On July 30th, the SEC cast a crucial vote, allowing authorized participants to subscribe and redeem crypto ETPs in physical form.

Crypto ETPs and ETFs are both financial instruments that list crypto assets (such as Bitcoin and Ethereum) in a securitized form on traditional stock exchanges, aiming to provide investors with convenient and compliant channels for investing in crypto assets. Both allow investors to trade like stocks, without requiring direct access to crypto wallets or private key management. They offer high liquidity and transparency, and require approval from financial regulators in their respective countries or regions. However, there are significant structural and regulatory differences between the two. Crypto ETFs are fund-based, typically physically backed products with stricter disclosure requirements and greater asset security, making them more challenging to obtain approval in markets with stricter regulations, such as the United States. Crypto ETPs, on the other hand, are a broader concept that isn't necessarily a fund. Their structure may carry issuer credit risk, but they are easier to launch and offer more flexibility in markets like Europe.

As we all know, Bitcoin and Ethereum spot ETFs utilize a cash subscription and redemption mechanism. Under this model, authorized participants must first pay cash to the ETF issuer, who then purchases an equivalent amount of Bitcoin or Ethereum in the spot market to back the newly issued ETF shares; the reverse process occurs upon redemption.

However, this indirect operation results in high transaction costs, settlement delays, and significant market slippage risks, limiting the product's appeal and primary market liquidity. With the liberalization of the physical subscription and redemption mechanism, authorized participants can now deliver Bitcoin or Ethereum directly to ETF issuers to create or redeem ETF shares. The further integration of on-chain assets with traditional financial products not only enhances operational efficiency but also opens new channels for compliant liquidity in crypto assets, potentially attracting more ETF participants. "This marks the beginning of a new chapter in SEC regulation. As a key goal of my tenure as Chairman, I have been committed to developing a regulatory framework for the crypto market that aligns with market realities. This approval will reduce product costs, improve operational efficiency, and ultimately benefit investors. It further promotes the development of a rational and clear crypto regulatory system," said SEC Chairman Paul S. Atkins. Bloomberg analyst James Seyffart believes that the physical subscription/redemption mechanism for Bitcoin and Ethereum spot ETFs has been approved. It is expected that upcoming altcoin ETFs will also likely allow physical subscriptions and redemptions from the outset. This is another step in the right direction.

Probability of Approval for 12 Altcoin ETFs

In addition, the SEC also approved other proposals to promote the development of the crypto asset market, including the listing and trading of a hybrid spot Bitcoin and Ethereum ETP, trading of options on certain Bitcoin spot ETPs, trading of options on the Flexible Exchange (FLEX), and increasing the position limit on certain Bitcoin ETP options to 250,000 contracts, enriching market tools and enhancing flexibility.

Opening up the listing channel, the universal standard for crypto ETPs may be launched within 60 days

In addition to the key step forward in the operating model of crypto ETPs, its listing channel has also ushered in important optimization.

Recently, Cboe BZX submitted a landmark rule amendment proposal to the US SEC. The core of this proposal is a systematic revision of Rule 14.11(e)(4), thereby establishing a universal listing standard for commodity-based trust shares (CBTS).

As early as 2013, BZX established a CBTS listing system based on Rule 14.11(e), but this rule was essentially designed for traditional commodity ETFs, mainly for trust structures backed by a single commodity (such as gold or oil). With the evolution of the market, such as the rise of crypto assets and the frequent emergence of complex investment portfolios, the shortcomings of the original rules have gradually been exposed, including limited asset types, cumbersome approval processes, and low innovation efficiency.

Bitcoin and Ethereum spot ETFs are a prime example, undergoing years and dozens of rounds of revisions and negotiations before final approval. Under existing regulations, each crypto ETF requires a separate 19b-4 application, with approval times taking up to 240 days. This model consumes regulatory resources and undermines market confidence.

The core logic of the new proposal is to institutionalize and standardize the "one coin, one review" ETF listing process, allowing direct listing of CBTS products that meet specific criteria.

This revision comprehensively upgrades the definition of CBTS, moving beyond the previous limitation of a single commodity. The new regulations clarify that trust units can be issued by trusts, limited liability companies, or other similar entities, significantly increasing flexibility. Assets are now permitted to include a variety of commodities (such as gold, oil, Bitcoin, and Ethereum), commodity-backed assets (including futures, options, and swaps), securities, and cash and cash equivalents (such as U.S. government bonds and certificates of deposit).

In addition, the proposal strengthens market transparency and investor protection requirements, requiring CBTS issuers to disclose the following core information daily on a public website free of charge, including daily holdings, net asset value (NAV) and market price, historical data, and trading volume. This significantly improves the readability and verifiability of ETF products, helping investors to reasonably assess the fair value and trading efficiency of ETFs.

It is worth mentioning that the proposal supports a crypto-staking mechanism. According to Rule 14.11(e)(4)(G), if the proportion of redeemable assets in an ETF is less than 85%, liquidity risk management policies and procedures must be established; if assets are pledged, segregated, re-pledged, restricted, or otherwise restricted in liquidity, resulting in T+1 redemption, they are deemed "non-redeemable"; if pledged assets exceed 15% of total assets, a special liquidity management mechanism must be activated. This means that as long as the ETF can ensure sufficient liquidity or establish a robust collateral risk control system, a collateral mechanism can be legally incorporated into the structure of crypto ETF products, providing more possibilities for product design and return models.

Currently, the proposal has not yet been officially implemented. According to Multicoin Capital General Counsel Greg Xethalis, the rule is still subject to public comment and review, and the comment period is expected to end within 21 days of publication in the Federal Register, meaning the rule is likely to be finalized in less than 60 days. Once passed, it will create an efficient and transparent listing channel for commodity ETPs, including crypto assets.

With the new regulations about to be released, who will be the biggest winners?

With the universal listing standards for crypto ETPs about to be released, Coinbase, the CFTC, and alt-ETFs are likely to be the biggest beneficiaries. As mentioned earlier, under the new regulatory framework, as long as an asset futures contract has a compliant trading record of at least six months on the Coinbase DCM contract market, it will qualify for general listing. This means Coinbase could become the "certification center" for altcoins on the path to ETFs. Furthermore, the new proposal's support for staking mechanisms also benefits relevant institutions. Coinbase Custody is currently a mainstream, recognized custody and staking service provider in the US, and it also serves as the custodian for numerous Bitcoin and Ethereum spot ETFs. The proposal explicitly states that issuers of CBTS products will not be registered as investment companies under the Investment Company Act of 1940, but will instead be subject to the regulatory framework of the Commodity Futures Trading Commission (CFTC). This means that the CFTC will control which crypto assets are eligible for ETFs and whether their futures can be listed, thus indirectly impacting ETF eligibility. The regulatory trend is clear: the product path for crypto ETFs will be determined by the SEC, while asset eligibility will be pre-vetted by the CFTC.

At the same time, the new regulations will also accelerate the approval and listing of more altcoin ETF products. According to Eric Balchunas, senior ETF analyst at Bloomberg, cryptocurrencies with a six-month futures trading track record on the Coinbase derivatives exchange will be eligible for inclusion in ETPs. Currently, there are approximately a dozen crypto assets that meet the criteria, consistent with market expectations of over 85% approval for major cryptocurrencies. Regarding the specific approval timeline, Balchunas stated that it could be in September or October of this year.

Crypto Projects Listed on Coinbase Derivatives Exchange for Over 6 Months

Greg Xethalis stated that the New York Stock Exchange and Nasdaq are expected to follow suit soon. Several ETP applications remain pending, including those for Solana and XRP. The SEC may choose to act directly on these ETP 19b-4 applications before Solana's October 10th deadline, or before the later deadline for XRP, or it may submit them for approval under the new General Listing Standards (GLS) process. Both are expected to be launched in the fourth quarter, including physical delivery and SOL staking returns.