Senators pressure SEC’s Gensler not to approve any more crypto ETFs

US Senators Call for Halt of Crypto ETF Approvals Due to Risks to Retail Investors

Two US senators, Jack Reed and Laphonza Butler, are urging SEC Chairman Gary Gensler to put a stop to any further approvals of crypto exchange-traded funds (ETFs). They argue that such investments pose significant risks to retail investors.

In a letter dated March 11, the senators expressed concerns about the potential for fraud and manipulation in the crypto market, particularly in thinly traded cryptocurrencies. They specifically mention the eight proposed spot Ether ETF applications awaiting approval by the SEC.

The senators believe that allowing these ETFs to be approved would expose retail investors to enormous risks, especially in light of the volatile nature of cryptocurrencies and the potential for pump-and-dump schemes. They argue that such investments should not be made available to the general public.

Web 3.0 and Its Impact on Decentralized Finance (DeFi)

The concept of Web 3.0, also known as the metaverse, has been gaining traction in recent years. It is often associated with the rise of decentralized finance (DeFi) and the use of blockchain technology in various applications.

Some experts, such as Jack Dorsey and Gary Vaynerchuk, have been vocal about the potential of Web 3.0 to revolutionize the way we interact with the internet and conduct financial transactions. However, there is still debate about whether the metaverse and Web 3.0 are one and the same.

One thing is for sure – Web 3.0 has the potential to greatly impact the world of DeFi. With its focus on decentralization and the use of smart contracts, Web 3.0 could pave the way for more advanced DeFi applications, such as decentralized autonomous organizations (DAOs) and non-fungible tokens (NFTs).

Senators Urge SEC to Not Set Precedent with Bitcoin ETF Approvals

Reed and Butler have advised the SEC against using the recent approval of spot Bitcoin (BTC) ETFs as a precedent for future approvals. They argue that although the Bitcoin market has shown some weaknesses, it is more established and closely monitored compared to smaller cryptocurrencies.

The senators have also called on the SEC to take specific actions with the already launched Bitcoin ETFs, including subjecting brokers and advisors to additional regulatory scrutiny.

According to Alexander Grieve, the government relations lead at crypto venture capital firm Paradigm, the success of spot Bitcoin ETFs has caused some concern among lawmakers on Capitol Hill.

Political Pressure Mounting on SEC Chairman Gensler for Ether ETF Approval

Crypto experts claim that a recent letter sent to SEC Chairman Gary Gensler is a clear indication of growing political pressure on him, making the approval of an Ether ETF in May less likely.

“The success of the Bitcoin ETF has upset high-ranking Democrats, leading to buyer’s remorse. This is one of the reasons why we are not optimistic about the chances of a spot Ether ETF approval,” stated ETF analyst Eric Balchunas in a post on March 15.

Just a few days earlier, on March 11, Balchunas had estimated the likelihood of a spot Ether ETF approval in May at a mere 35%. This is a significant decrease from his January prediction of a 70% chance of approval. Balchunas also expressed concern about the SEC’s lack of response to fund issuers and other factors that could hinder the approval process.

Anti-Crypto Legislators Butler and Reed Involved in Crackdown Efforts

The two legislators who signed the letter to Gensler, Congressmen Brad Sherman and Josh Gottheimer, have been actively involved in multiple pieces of legislation aimed at regulating and restricting cryptocurrency in the US.

On December 11th of last year, Butler became a co-sponsor of Senator Elizabeth Warren’s controversial Digital Asset Anti-Money Laundering Act bill. In July, Reed introduced a bipartisan bill aimed at strengthening regulations and sanctions for decentralized finance (DeFi) by tightening Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.

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