Senators fight against additional crypto-ETFs

In the US, opposition is growing to allowing even more crypto-based spot ETFs. In a joint letter Democratic Senators Jack Reed and Laphonza Butler are calling on SEC Chairman Gary Gensler not to allow more ETFs.

Any further admission would pose "enormous risks" with respect to "thinly traded cryptocurrencies or cryptocurrencies whose prices are particularly susceptible to pump-and-dump or other fraudulent schemes," they say.

Therefore, the admission of Bitcoin ETFs should not become a precedent for further admissions, according to Reed and Butler. Investors would be exposed to "fraud and manipulation."

Although the market for Bitcoin has "serious weaknesses," it is less risky than the market for altcoins: "As vulnerable as Bitcoin is to fraud and manipulation, the markets for other cryptocurrencies are much more susceptible to misconduct." The claims are met with much misunderstanding in the crypto community.

Paul Grewal, Chief Legal Officer at crypto exchange Coinbase, responded to X: "With all due respect, the evidence points to the exact opposite. We have discussed our analysis with the SEC staff and are happy to do the same for you and other policymakers who have questions."

In the letter, the senators also call on the SEC to take "several specific steps" regarding Bitcoin ETFs that have already launched. For example, ETF brokers should be more tightly controlled.

The requirements could put a damper on the approval of Ethereum ETFs in particular. The SEC has currently received eight spot Ethereum ETF applications. Originally, observers expected a possible May admission. However, this seems increasingly unlikely.

According to Bloomberg analyst Eric Balchunas, negotiations are currently at a standstill. He lowered the probability of approval by the end of May to "35 percent."