Senators Call for SEC to Stop Approving New Crypto Products

Senators Jack Reed and Laphonza Butler requested the SEC to halt new crypto ETP approvals beyond Bitcoin, raising investor protection concerns due to the volatile nature of the crypto market.

They stressed the importance of providing clear information about Bitcoin ETPs to the public, referencing a FINRA study that found 70% of broker communications about cryptocurrency did not comply with disclosure standards, often misleadingly comparing it to cash or underexplaining risks.

The senators criticized the misleading marketing of Bitcoin ETPs as "ETFs", which could lead investors to wrongly believe they have the same protections as traditional ETFs and mutual funds, highlighting significant confusion over risks and protections.

They urged the SEC to review communications for accuracy, ensure investment recommendations align with client's best interests, and adopt clearer naming conventions to prevent confusion. They also called for a cautious approach in approving ETPs for other cryptocurrencies, citing concerns over market integrity.

The crypto community's reactions have been mixed, with some seeing the senators' actions as opposition to Bitcoin spot products. Critics question the motives behind the concerns, while others, like Paul Grewal from Coinbase, argue against the notion that only Bitcoin is suitable for ETPs, pointing out Ethereum's robust market.