SEC Infighting Threatens to Derail Crypto ETF Approvals—Here’s Why It Matters
Regulatory chaos erupts as SEC divisions clash over crypto ETFs.
Behind closed doors, the Securities and Exchange Commission is tearing itself apart over digital asset ETFs—and the fallout could freeze institutional adoption in its tracks. Sources report heated debates between pro-innovation staff and hardened skeptics, with Chair Gensler's team allegedly suppressing internal dissent through bureaucratic maneuvering.
The stalemate comes at a critical juncture. BlackRock's revised spot Bitcoin ETF filing last week showed institutional demand hasn't cooled—but SEC infighting might ice the entire sector. Division directors reportedly can't agree on custody requirements, market surveillance, or even basic definitions of crypto securities.
Meanwhile, crypto markets shrug. Bitcoin holds above $28K as traders bet (again) that regulators will eventually capitulate to Wall Street pressure. 'The SEC moves at the speed of molasses—unless banks stand to lose money,' quipped one hedge fund manager between sips of a $22 oat milk latte.
One thing's clear: every month of delay pushes more trading volume to offshore platforms. The real question isn't if crypto ETFs launch—but whether the SEC will still be relevant when they do.
Why is the SEC Slow on Crypto ETFs?
Since the SEC came under new management this year, the crypto community has expected a wave of support for new ETFs.
However, over the last few weeks, we’ve seen repeated delays and minor setbacks, with bullish developments nonetheless hitting snags. Greg Xethalis, General Counsel at Multicoin Capital, circulated something that could be very relevant:
On July 29, the SEC had 13 votes, all relating to crypto ETPs.
– Scheduling comments on 431 Action against DGLC and Bit10
– Several on options on IBIT, BITB and GBTC
– Approval of Bitwise BTCÐ
– In-Kind Creates and Redeems
They all broke 3 in favor and 1 opposed. pic.twitter.com/PDa0dbTe6e
ETF analysts quickly noticed this observation, using it as evidence for a broader theory. Essentially, the SEC has a “delegated authority” procedure that allows streamlined decisions, but a single Commissioner can force the slower process.
In one day, the SEC’s most anti-crypto Commissioner invoked this authority for several votes regarding crypto ETFs.
How Big of a Problem Is This?
Since crypto industry lobbyists successfully thwarted Caroline Crenshaw’s bid for SEC re-nomination, she has persistently opposed the Commission’s new pro-crypto shift. These votes signal her firm opposition to crypto ETFs, and the SEC has to entertain it.
So, what’s the damage? Crenshaw voted against 13 different proposals on crypto ETFs, including things like multicoin basket products, options trading, and more.
However, at least some of these proposals went through despite her dissent. The SEC can still pass a friendly crypto ETF policy, it just might be more of a hassle.
Still, it is a noteworthy setback. The SEC has been trying to streamline altcoin ETF approvals, and this plan might not materialize.
For now, expect the Commission to require a slow timetable on any ETF-related proposals. Advancements will still happen, but the community will continue experiencing delays.
