SEC Develops Framework for Token-Based ETFs, Streamlining Approval Process

The Securities and Exchange Commission (SEC) is actively collaborating with US exchanges to develop a generic listing framework for token-based exchange-traded funds (ETFs). This initiative aims to streamline the approval process, potentially eliminating the need for issuers to file individual rule-change requests. According to reports, this framework would allow ETF sponsors to bypass the customary Form 19b-4 process if the underlying token meets predetermined criteria. Instead, sponsors would submit a registration statement on Form S-1, observe the standard 75-day review period, and list the product once the waiting period ends.

Metrics such as market capitalization, on-exchange trading volume, and daily liquidity are among the criteria being discussed for this framework. The current rule-change pathway requires each spot crypto ETF to secure a Commission order before listing, a step designed for novel or complex products. Moving to a standing rule for qualifying assets would shorten timelines and reduce iterative comment cycles between the agency and applicants.

Analysts have welcomed this potential development, noting that a generic standard would offer clear rules and deliver long-requested regulatory certainty. This clarity is seen as crucial for the crypto ETF space, potentially encouraging multi-asset portfolios and staking-based structures. The key question centers on the eventual thresholds, with predictions that they will likely be loose enough to include the vast majority of top 50 coins.

Recent momentum in the ETF space includes projections of a second-half wave of multi-asset index and basket ETFs, with funds for various cryptocurrencies carrying a high probability of approval later in the year. Following these predictions, the Grayscale crypto basket fund received approval to be converted into an ETF. Additionally, the approval odds for ETFs based on Solana, Litecoin, and XRP have been raised to 95% by 2025, based on rising institutional demand and the current administration’s pro-crypto stance.