Crypto
US Senators Demand SEC Halt Crypto ETP Approvals Due to Disclosure Concerns
The Securities and Exchange Commission (SEC) is facing
pressure from Democratic senators to halt the approval of new cryptocurrency
exchange-traded products (ETPs), citing concerns over risks to retail
investors.
According to a letter written to the regulator on
March 11, Senators Jack Reed and Laphonza Butler emphasize 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.”
The success of the BTC spot products clearly ruffling some feathers on the Hill. @SenatorJackReed and @Senlaphonza write to the @SECGov urging:
-no further ETPs for other tokens
-make life difficult (i.e. examinations/reviews) for brokers and advisers that recommend BTC ETPs pic.twitter.com/enxdumC02N— Alexander Grieve (@AlexanderGrieve) March 14, 2024
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 expressed alarm over
brokers falsely equating cryptocurrency with cash and providing misleading
explanations of cryptocurrency risks. Such deficiencies raise concerns about
incomplete and deceptive information regarding Bitcoin ETPs.
Risk Factors
The senators 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 Bitcoin’s
vulnerabilities and 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 simplifies 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 Democratic senators to halt the approval of new cryptocurrency
exchange-traded products (ETPs), citing concerns over risks to retail
investors.
According to a letter written to the regulator on
March 11, Senators Jack Reed and Laphonza Butler emphasize 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.”
The success of the BTC spot products clearly ruffling some feathers on the Hill. @SenatorJackReed and @Senlaphonza write to the @SECGov urging:
-no further ETPs for other tokens
-make life difficult (i.e. examinations/reviews) for brokers and advisers that recommend BTC ETPs pic.twitter.com/enxdumC02N— Alexander Grieve (@AlexanderGrieve) March 14, 2024
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 expressed alarm over
brokers falsely equating cryptocurrency with cash and providing misleading
explanations of cryptocurrency risks. Such deficiencies raise concerns about
incomplete and deceptive information regarding Bitcoin ETPs.
Risk Factors
The senators 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 Bitcoin’s
vulnerabilities and 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 simplifies 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.
Bitcoin’s price sank to $63,000 on Thursday, its lowest level in more than a year, and half its all-time peak of $126,000, reached in October 2025. A months-long dip in cryptocurrency prices has tanked shares of companies that have increasingly invested in bitcoin, exacerbating broader stock market jitters.
Bitcoin rode a high during Donald Trump’s ascent to the presidency in 2024 and throughout 2025; its price steadily increased as the president made one industry-friendly move after another. Crypto’s largest currency hit $100,000 for the first time in December 2024 and even rose to a record high of $126,210.50 on 6 October, according to Coinbase. But bitcoin’s valuation has dipped over the last few months, falling especially hard in January and the start of February.
Companies that went all in on bitcoin have been hit hard in the recent sell-off. CoinGecko data shows that the global crypto market has lost $2tn in value since early October. Multiple cryptocurrency ventures backed by the Trump family and listed on the stock market saw their values decline in response to bitcoin’s slump.
Bitcoin, which emerged after the 2008 financial crisis as a way to bypass banks and traditional payment methods, is the world’s most valuable cryptocurrency. The second-largest cryptocurrency, ether, has faced losses of more than 30% this year alone, adding insult to injury after it missed out on the boom of 2025.
In addition to financial disaster, the cryptocurrency faces regulatory headwinds. Some Democrats and watchdogs in the US have raised alarms about Trump’s conflicts of interest around cryptocurrencies and a lack of regulation under the current administration. US representative Ro Khanna said on Wednesday that he planned to investigate World Liberty Financial, following reports from the Wall Street Journal that a member of the Emirati royal family backed a $500m investment into the Trump family’s cryptocurrency company. Khanna wrote in a statement that the reported deal “may have contributed to changes to US policy”.
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