As President-elect Donald Trump gears up for his second term, the U.S. cryptocurrency landscape braces for a seismic regulatory transformation. A slew of crypto ETFs could soon see approval, marking a potentially game-changing era for digital assets.
Insights from Bloomberg's ETF specialist, Eric Balchunas, suggest imminent approval for dual Bitcoin and Ethereum ETFs by Hasdex, Franklin Templeton, and Bitwise Invest. However, recent denials of Solana ETF applications signal that, along with XRP, these will await the new U.S. SEC leadership before serious consideration. Yet, approval won't be a simple affair. Balchunas highlighted "complex legal issues" concerning these tokens' classification as "securities."
Conversely, Litecoin, stemming from Bitcoin, may be deemed a commodity by the SEC, possibly easing its path to approval. Canary Capital stands alone in filing for a Litecoin or HBAR ETF. Balchunas sees a modestly better chance for these filings, though investor demand remains uncertain.
This expected upswing in crypto ETF green lights aligns with Trump's broader digital asset regulatory adjustments. On December 4, Trump named Paul Atkins as a prospective SEC chair, emphasizing a push towards a crypto-accommodating climate. This shift follows the resignation of SEC chair Gary Gensler, aligning with Trump’s January 20 inauguration.
Atkins, who served as SEC Commissioner under President George W. Bush, is known for advocating reduced regulatory pressure on financial markets. Trump lauded Atkins on Truth Social, calling him a "proven leader for common sense regulations." The President-elect highlighted Atkins's faith in the power of capital markets and digital assets for economic growth.
As Trump’s team prepares to take office, focus shifts to the Commodity Futures Trading Commission (CFTC) and its potential new leadership. Sources told Fox Business that Trump's administration might empower the CFTC to regulate select crypto assets, further molding U.S. cryptocurrency regulation.
A Brief History of Crypto ETFs in 2024
In 2024, the cryptocurrency market witnessed a transformative shift with the introduction and rapid adoption of exchange-traded funds (ETFs) linked to digital assets, notably Bitcoin and Ethereum. This development marked a significant milestone in integrating cryptocurrencies into mainstream finance, offering investors regulated and accessible avenues to gain exposure to these volatile assets.
The U.S. Securities and Exchange Commission (SEC) played a pivotal role in this evolution. After years of deliberation, the SEC approved the first spot Bitcoin ETFs in January 2024, enabling investors to directly hold Bitcoin within an ETF structure.
This approval led to a surge in Bitcoin’s price, which surpassed the $100,000 mark by December 2024, fueled by optimism surrounding pro-cryptocurrency policies anticipated from President-elect Donald Trump’s administration.
BlackRock’s iShares Bitcoin Trust emerged as a dominant player, amassing $19.68 billion in assets by May 2024, thereby becoming the world’s largest Bitcoin fund. This achievement underscored the growing institutional interest in cryptocurrency investments. BlackRock’s strategic entry into the crypto market, coupled with competitive management fees, attracted a broad spectrum of investors seeking exposure to digital assets.
Following the success of Bitcoin ETFs, the SEC extended its approvals to Ethereum, the second-largest cryptocurrency by market capitalization. In June 2024, the SEC approved the first spot Ether ETFs, further broadening the scope of crypto investment products available to the public. This move was seen as a significant step toward mainstream acceptance of cryptocurrencies, despite ongoing debates about their regulatory classification.
The political landscape also influenced the trajectory of crypto ETFs. Donald Trump’s election victory in November 2024 was perceived as a catalyst for the approval of a broader range of cryptocurrency ETFs. Industry stakeholders anticipated that a more crypto-friendly administration would expedite the approval process for ETFs linked to a variety of digital assets beyond Bitcoin and Ethereum.
Despite these advancements, the rapid proliferation of crypto ETFs raised concerns among some experts. Critics cautioned that the increased accessibility to volatile digital assets through ETFs could expose retail investors to heightened risks. They emphasized the need for comprehensive regulatory frameworks to ensure investor protection and maintain market stability as cryptocurrencies continue to integrate into traditional financial systems.
Overall, these moves are seen as a boon for the broader crypto industry. The anticipated regulatory shift and a welcoming climate are projected to drive increased institutional adoption.