US Senators Demand SEC Halt Crypto ETP Approvals Due to Disclosure Concerns

US Senators Demand SEC Halt Crypto ETP Approvals Due to Disclosure Concerns

Time Stamp: March 15, 2024 10:42 AM
US Senators Demand SEC Halt Crypto ETP Approvals Due to Disclosure Concerns PlatoBlockchain Data Intelligence. Vertical Search. Ai.

The Securities and Exchange Commission (SEC) is facing
pressure from Congress to halt the approval of new cryptocurrency
exchange-traded products (ETPs) due to concerns about risks posed to retail
investors.

According to a letter written to the regulator on
March 11, Senators Jack Reed and Laphonza Butler emphasized the dangers posed by
inadequate disclosures by brokers and insufficient liquidity in major
cryptocurrencies.

The senators mentioned: “We write to urge the
Securities and Exchange Commission (SEC) to take steps to protect investors
following its recent approval of the listing and trading of certain spot
Bitcoin exchange-traded products (ETPs).”

“The SEC’s approvals have provided a green light
for Wall Street to sell volatile cryptocurrency investments to ordinary
Americans through their brokerage and retirement accounts.”

Senators Reed and Butler highlighted findings from a
survey by FINRA revealing that 70% of brokers’ communications with retail
investors violated fair disclosure rules.

Specifically, the legislators raised questions over
brokers falsely equating cryptocurrency with cash and providing misleading
explanations of cryptocurrency risks. Such deficiencies reportedly highlight incomplete and deceptive information regarding Bitcoin ETPs.

Risk Factors

The legislators argue that labeling spot Bitcoin ETFs as such obscures important characteristics,
potentially misleading retail investors. They stressed the need for investors
to understand the differences between ETPs and traditional funds.

Additionally, Reed and Butler expressed skepticism
about the integrity of cryptocurrencies , particularly highlighting the vulnerability of Bitcoin and its susceptibility to fraudulent schemes. They warned of the risks retail investors could face
from ETPs linked to cryptocurrencies, especially those prone to price
manipulation.

In January, the SEC approved 11 spot Bitcoin ETFs.
This approval happened after years of anticipation and rejections, signaling a
significant shift in how investors can access and engage with cryptocurrencies
on traditional financial platforms.

The approval of spot Bitcoin ETFs simplified retail
investors’ access to cryptocurrencies, enabling them to trade crypto through
their brokerage accounts. This eliminates the need for separate crypto exchanges
and mitigates risks associated with direct holdings, such as security breaches
and fraud.

The Securities and Exchange Commission (SEC) is facing
pressure from Congress to halt the approval of new cryptocurrency
exchange-traded products (ETPs) due to concerns about risks posed to retail
investors.

According to a letter written to the regulator on
March 11, Senators Jack Reed and Laphonza Butler emphasized the dangers posed by
inadequate disclosures by brokers and insufficient liquidity in major
cryptocurrencies.

The senators mentioned: “We write to urge the
Securities and Exchange Commission (SEC) to take steps to protect investors
following its recent approval of the listing and trading of certain spot
Bitcoin exchange-traded products (ETPs).”

“The SEC’s approvals have provided a green light
for Wall Street to sell volatile cryptocurrency investments to ordinary
Americans through their brokerage and retirement accounts.”

Senators Reed and Butler highlighted findings from a
survey by FINRA revealing that 70% of brokers’ communications with retail
investors violated fair disclosure rules.

Specifically, the legislators raised questions over
brokers falsely equating cryptocurrency with cash and providing misleading
explanations of cryptocurrency risks. Such deficiencies reportedly highlight incomplete and deceptive information regarding Bitcoin ETPs.

Risk Factors

The legislators argue that labeling spot Bitcoin ETFs as such obscures important characteristics,
potentially misleading retail investors. They stressed the need for investors
to understand the differences between ETPs and traditional funds.

Additionally, Reed and Butler expressed skepticism
about the integrity of cryptocurrencies , particularly highlighting the vulnerability of Bitcoin and its susceptibility to fraudulent schemes. They warned of the risks retail investors could face
from ETPs linked to cryptocurrencies, especially those prone to price
manipulation.

In January, the SEC approved 11 spot Bitcoin ETFs.
This approval happened after years of anticipation and rejections, signaling a
significant shift in how investors can access and engage with cryptocurrencies
on traditional financial platforms.

The approval of spot Bitcoin ETFs simplified retail
investors’ access to cryptocurrencies, enabling them to trade crypto through
their brokerage accounts. This eliminates the need for separate crypto exchanges
and mitigates risks associated with direct holdings, such as security breaches
and fraud.

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