Two Democratic senators, Jack Reed and Laphonza Butler, have written a letter to Gary Gensler, urging him to halt the approval of any further cryptocurrency exchange-traded funds (ETFs). They argue that allowing such ETFs would expose retail investors to “thinly traded” markets that are susceptible to fraud and manipulation. The Securities and Exchange Commission (SEC) currently has eight proposed spot Ether ETF applications awaiting approval. Reed and Butler also express concerns about the recent approval of spot Bitcoin ETFs, stating that while the Bitcoin market is more established and well-scrutinized, it still displays “serious weakness.” They call for increased oversight of Bitcoin ETFs and further regulatory scrutiny of brokers and advisors. Alexander Grieve, from crypto venture capital firm Paradigm, suggests that the success of spot Bitcoin ETFs has caused concern among lawmakers. This pressure on Gensler may make the approval of an Ether ETF in May less likely. The senators’ letter is seen as evidence of growing political pressure on Gensler. They have previously been involved in legislation aimed at regulating cryptocurrency, such as tightening anti-money laundering regulations and sanctions requirements for decentralized finance.
Senators urge SEC’s Gensler to refrain from approving additional cryptocurrency ETFs.