Two US senators have called on the Securities and Exchange Commission (SEC) to halt the approval of any further crypto exchange-traded funds (ETFs), citing risks to retail investors. In a letter to SEC Chair Gary Gensler, Senators Jack Reed and Laphonza Butler expressed concerns about the potential for fraud and manipulation in the thinly traded markets for smaller cryptocurrencies.
“Retail investors would face enormous risks from ETPs referencing thinly traded cryptocurrencies or cryptocurrencies whose prices are especially susceptible to pump-and-dump or other fraudulent schemes,” the senators wrote.
Reed and Butler also urged the SEC to not allow the recent approval of spot Bitcoin ETFs to become a precedent for further approvals. They argued that while the Bitcoin market is more established and well-scrutinized, the markets for other cryptocurrencies are more vulnerable to misconduct. The senators also called for increased oversight of the already launched Bitcoin ETF products, including regulatory scrutiny of brokers and advisors.
Some industry observers believe that the success of spot Bitcoin ETFs has upset some lawmakers on Capitol Hill. “The blockbuster success of the Bitcoin ETF is upsetting to high-ranking Dems. Buyer’s remorse,” said Bloomberg ETF analyst Eric Balchunas.