Choices Amid Government Shutdown: Will the New Cryptocurrency ETP Regulations Become a Watershed for the Industry?

Original Source: Blockchain Knight

Original Title: Reflections Amid U.S. Government Shutdown: Will New Cryptocurrency ETP Regulations Become an Industry Watershed?

As the U.S. government shutdown continues, now is a good time to step back and examine a key decision by the SEC (U.S. Securities and Exchange Commission).

This decision may influence cryptocurrency industry innovation, financial advisors, and ordinary investors for years to come.

The SEC recently enacted a low-profile yet milestone shift: approving universal listing standards for cryptocurrency exchange-traded products (ETPs).

This means exchanges no longer need to submit individual rule filings for each eligible cryptocurrency ETP to list them. This structural change ends years of uncertainty where ETPs required “case-by-case review.”

The impact of this development cannot be overstated; it should be ranked among the industry’s major breakthroughs, alongside the launch of bitcoin futures on the Chicago Mercantile Exchange (CME) in 2017, Coinbase’s Wall Street debut in 2021, the Ethereum Merge in 2022, and the approval of spot bitcoin ETFs in 2024.

The following four reasons make this new regulation a watershed moment for the cryptocurrency industry:

1. Shorter Cycles, New ETPs More Feasible

Previously, each ETP had to undergo the SEC’s lengthy review process, which could take up to 240 days. Under the new rules, products that meet preset standards can be launched in as little as 75 days—a “light speed” pace by regulatory standards.

This adjustment reduces uncertainty and holding costs for issuers, which is crucial: launching an ETP requires real capital and resources, including seed funding, legal/registration fees, listing costs, and ongoing marketing expenses, all of which accumulate while an application is in limbo.

The shortened review cycle makes more strategies economically viable, enriching the ETP product pipeline.

It is expected that under this simplified framework, a large number of spot token ETPs will be launched in succession, not only including bitcoin (BTC) and ethereum (ETH), but also covering other coins such as SOL and XRP.

For the cryptocurrency industry, long stuck in an approval deadlock, this is undoubtedly the sound of the starting gun.

2. Financial Advisors Can Finally Include Crypto Assets in Portfolios

Previously, incorporating cryptocurrencies into traditional investment portfolios faced many obstacles. While a few bitcoin and ethereum funds have emerged over the past two years, many mainstream brokerages and Registered Investment Advisors (RIAs) have continued to avoid cryptocurrencies.

A typical example is Vanguard, which manages $10 trillions in assets and has consistently refused to offer clients access to spot bitcoin ETFs.

This conservative stance has left countless investors watching from the sidelines and has given financial advisors almost no compliant options for crypto allocation.

The SEC’s new rules open the door for these investors and advisors. With a simplified listing path for diversified crypto ETPs, advisors can finally offer clients index-like crypto exposure through familiar platforms.

Within 48 hours of the new rules, Grayscale Investments received approval to convert its “Digital Large Cap Fund” into the “Grayscale Crypto 5 ETF.”

Although this product is still on hold and can only begin trading after final approval, the conversion will allow clients to invest in a basket of the five largest market cap cryptocurrencies.

With such products, wealth managers can now allocate cryptocurrencies as easily as S&P 500 index funds or gold funds.

In fact, the normalization of cryptocurrencies in standard brokerage accounts means retirees can hold digital assets alongside stocks and bonds in their Individual Retirement Accounts (IRAs).

Registered Investment Advisors (RIAs) can also include cryptocurrencies in asset rebalancing strategies without complex operational procedures or compliance headaches.

3. Regulated ETPs Drive Integration of Crypto and Banking

Beyond improving accessibility, this development also deepens the integration of cryptocurrencies with traditional finance.

When digital assets are housed in regulated product vehicles, they can be incorporated into the existing financial system in a more robust way.

JPMorgan, long skeptical of cryptocurrencies, recently announced it would accept cryptocurrency ETF shares as loan collateral, similar to margin loans secured by stock ETFs.

As more ETPs are included in standard custody and reporting systems, banks will be more willing to offer loans secured by these assets.

The ability to use crypto holdings as collateral for loans makes cryptocurrencies “active participants” in the banking and credit markets.

Today’s cryptocurrencies are no longer isolated; like stocks or U.S. Treasuries, they are gradually becoming one of the pillars of the financial system.

4. Clear Rules Spur a New Wave of Innovation

Perhaps the most noteworthy change in this transformation is the shift in core regulatory philosophy.

After years of uncertainty, U.S. regulators have finally signaled: cryptocurrencies should be integrated into the existing financial system, not kept outside it.

SEC Chairman Paul Atkins has launched the “Cryptocurrency Initiative,” directing the SEC to review securities law provisions to pave the way for the market’s migration on-chain.

This top-down clarity of purpose injects momentum into innovation. When companies know the regulatory boundaries, they can move forward with greater confidence.

Currently, both traditional financial institutions and startups are racing to launch products under the updated rules, ranging from multi-coin index ETPs to experimental yield-bearing token funds.

The results of this transformation will go beyond the emergence of new ETPs; it will also serve as a test of U.S. competitiveness. In the future, we may see tokenized real estate ETFs or other thematic crypto products.

If the U.S. sets the rules, innovation will take root here; if not, it will flow overseas. By rapidly incorporating cryptocurrencies into mainstream financial products and clearly supporting an “on-chain future,” the U.S. government is keeping America “competitive” in crypto—and may even regain the lead.

This regulatory adjustment is one of the most significant changes to the cryptocurrency industry in recent years.

It’s not just about ETPs themselves; it also means cryptocurrencies are recognized as a legitimate component of modern investment portfolios.

For financial advisors, this means a greater ability to meet client needs; for investors, it brings more choices and convenience; for innovators, it marks America’s return to the crypto race.

The process of integrating cryptocurrencies into the daily financial system is long, but now this process has officially begun—and with clear, explicit rules, its pace is accelerating.

The road to a truly on-chain financial system is now open, and at least in my view, its prospects are worth optimistic anticipation.