SEC Issues Latest Guidance on Crypto ETFs
The Securities and Exchange Commission (SEC) this month announced new guidance on disclosure requirements for exchange-traded funds (ETFs) linked to cryptocurrencies.
The requirements will mandate that issuers share risks about the offered products and use plain language when describing crypto assets. This includes incorporating an overview of the trust; offering descriptions of the underlying crypto assets and associated networks; polices regarding the management of the underlying crypto assets including limitations on how they are held or used; policies on incidental rights associated with the underlying crypto assets; and the amount of underlying crypto assets per share held by the trust.
“Disclosure should be presented in clear, concise, and understandable language, without overly relying on technical terminology or jargon,” the SEC stated in their latest notice.
Further, these products should have descriptions that include “information about the launch of its assets and the initial development team, the method of generating, minting, or mining the crypto assets, the process for validating transactions, the consensus mechanism, use cases, and any fees associated with the use of the crypto network(s) or applications,” the SEC added.
Similarly, the SEC’s latest guidance will require companies to disclose associated risks in applying crypto-held ETFs, including risks related to underlying crypto assets and markets that pose a risk of investor losses; risks of fraud, manipulation, front-running, wash-trading, security failures or operational problems on crypto asset trading platforms; risks of attacks on the associated network(s) by malicious actors, and more.
The new guidance follows SEC Chairman Paul Atkins’ ascent as leader of the agency. Atkins, a CEO for a consulting firm that works with clients in the financial and crypto industries, is expected to lead the agency with a more lenient stance on digital assets compared to predecessor and former SEC Chairman Gary Gensler, including growing a friendlier rapport with crypto companies.
SEC Guidance Indicates Regulatory Shift
The SEC’s latest disclosure requirements come as other agencies issue lax guidance on the controversial asset. In May, the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) rescinded its prior 2022 compliance release that had discouraged fiduciaries from incorporating crypto options in retirement plans.
Instead, the department reaffirmed its neutral stance on the asset, in which it said it neither endorsed nor disapproved of plan fiduciaries who incorporate cryptocurrency into a plan’s investment menu, despite much dismay from independent organizations and Senate Democrats.
“We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not DC bureaucrats,” said U.S. Secretary of Labor Lori Chavez-DeRemer at the time.
Lawmakers have also unveiled measures to incorporate digital assets into new regulation. Sen. Cynthia Lummis (R-WY) recently introduced legislation that would update tax rules for cryptocurrencies, like exempt crypto lending from taxes and defer taxes on income produced from crypto mining.
The legislation is estimated by the Congressional Joint Committee on Taxation to generate approximately $600 million in net revenue during the 2025-2034 budget window.
“We cannot allow our archaic tax policies to stifle American innovation, and my legislation ensures Americans can participate in the digital economy without inadvertent tax violations,” Lummis said in a statement.
The reinstated support follows a wave of crypto-friendly initiatives led by President Donald Trump. Shortly following his inauguration, Trump signed an executive order opening access to public blockchain networks.
In his order, Trump called on federal regulators to provide “regulatory clarity and certainty built on technology-neutral regulations, frameworks that account for emerging technologies, transparent decision making, and well-defined jurisdictional regulatory boundaries.”
SEE ALSO:
Trump Signs Executive Order Supporting Crypto
Senate Democrats Urge DOL to Reinstate Crypto Guidance
EBSA Rescinds Guidance Warning Against Cryptocurrency in 401(k)s
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
