The Overlooked Turning Point: How the New Cryptocurrency ETP Regulations Could Become an Industry Watershed?

The integration of cryptocurrencies into the daily financial system is a long process, but now this process has officially begun.

Written by: cryptoslate

Translated by: Blockchain Knight

As the U.S. government shutdown continues, now is a good time to step back and examine a key decision by the SEC (U.S. Securities and Exchange Commission).

This decision may influence innovation in the cryptocurrency industry, financial advisors, and ordinary investors for years to come.

The SEC recently made a low-key but milestone shift: approving universal listing standards for cryptocurrency exchange-traded products (ETPs).

This means that exchanges no longer need to submit individual rule applications for each eligible crypto ETP to list them. This structural change ends years of uncertainty caused by the “case-by-case review” of ETPs.

The impact of this development cannot be overstated; it should be ranked among the major breakthroughs in the industry, alongside the launch of bitcoin futures by the Chicago Mercantile Exchange (CME) in 2017, Coinbase’s listing on Wall Street in 2021, the Ethereum Merge in 2022, and the approval of spot bitcoin ETFs in 2024.

The following four reasons make this new regulation a watershed moment for the cryptocurrency industry:

1. Shorter Cycles, More Feasible New ETPs

Previously, each ETP had to undergo a lengthy SEC review process, which could take up to 240 days. Under the new rules, new products that meet preset standards can be launched in as little as 75 days—a “lightning speed” by regulatory standards.

This adjustment reduces uncertainty and holding costs for issuers, which is crucial: launching an ETP requires real capital and resources, including seed funding, legal/registration fees, listing costs, and ongoing marketing expenses, all of which accumulate while the application is in limbo.

The shortened review cycle makes more strategies economically viable, enriching the ETP product pipeline.

It is expected that under this simplified framework, a large number of spot token ETPs will be launched one after another, not only including bitcoin (BTC) and ethereum (ETH), but also covering SOL, XRP, and other tokens.

For the cryptocurrency industry, which has long been stuck in a review deadlock, this is undoubtedly the “starting gun.”

2. Financial Advisors Can Finally Include Crypto Assets in Portfolios

Previously, incorporating cryptocurrencies into traditional investment portfolios faced many obstacles. Although a few bitcoin and ethereum funds have emerged in the past two years, many mainstream brokers and Registered Investment Advisors (RIAs) have still shunned cryptocurrencies.

A typical case is Vanguard, which manages $10 trillion in assets and has consistently refused to offer clients access to spot bitcoin ETFs.

This conservative stance has left countless investors “watching from the sidelines” and has left financial advisors with almost no compliant crypto allocation options.

The SEC’s new rules open the door for these investors and advisors. With the simplified listing path for diversified crypto ETPs, advisors can finally offer clients index-like crypto exposure through familiar platforms.

Within 48 hours of the new rules, Grayscale Investments received approval to convert its “Digital Large Cap Fund” into the “Grayscale Crypto 5 ETF.”

Although this product is still on hold and will only begin trading after final approval, this conversion allows clients to invest in a basket of assets composed of the five largest market cap cryptocurrencies.

With such products, wealth managers can now allocate cryptocurrencies as conveniently as allocating S&P 500 index funds or gold funds.

In fact, the “normalization” of cryptocurrencies in standard brokerage accounts means that retirees can hold digital assets alongside stocks and bonds in their Individual Retirement Accounts (IRAs).

Registered Investment Advisors (RIAs) can also include cryptocurrencies in asset rebalancing strategies without complex operational processes or compliance challenges.

3. Regulated ETPs Promote Integration of Crypto and Banking

In addition to improving accessibility, this development also deepens the integration of cryptocurrencies with traditional finance.

When digital assets are housed in regulated product vehicles, they can be integrated into the existing financial system in a more powerful way.

JPMorgan, which has long been skeptical of cryptocurrencies, recently announced that it would accept shares of crypto ETFs as loan collateral, similar to the margin lending model using stock ETFs as collateral.

As more ETPs are included in standard custody and reporting systems, banks will be more willing to provide loans secured by these assets.

The ability to use cryptocurrency holdings as collateral for loans makes cryptocurrencies “active participants” in the banking and credit markets.

Today, cryptocurrencies are no longer isolated; they are gradually becoming one of the pillars of the financial system, just like stocks or U.S. Treasury bonds.

4. Clear Rules Spur a New Wave of Innovation

Perhaps the most noteworthy change in this transformation is the shift in core regulatory philosophy.

After years of uncertainty, U.S. regulators have finally sent a signal: cryptocurrencies should be included in the existing financial system, not left outside of it.

SEC Chairman Paul Atkins has launched the “Crypto Plan,” directing the SEC to sort out relevant securities law provisions to pave the way for the market to migrate on-chain.

This top-down clarity of purpose injects momentum into innovation. When companies have clear regulatory boundaries, they can move forward with greater confidence.

Currently, traditional financial institutions and startups are racing to launch products based on the updated rules, ranging from multi-token index ETPs to experimental yield-bearing token funds.

The results of this transformation will go beyond the emergence of new ETPs and will serve as a test of U.S. competitiveness. In the future, we may see tokenized real estate ETFs or other thematic crypto products.

If the U.S. sets the rules, innovation will take place here; if not, it will flow overseas. By quickly incorporating cryptocurrencies into mainstream financial products and clearly supporting an “on-chain future,” the U.S. government is keeping the country “competitive” in the crypto field and may even regain its leading position.

This rule change is one of the most significant transformations for the cryptocurrency industry in recent years.

This is not just about ETPs themselves; it also means that cryptocurrencies are recognized as a legitimate component of modern investment portfolios.

For financial advisors, this means a greater ability to fully meet client needs; for investors, it brings more choices and convenience; for innovators, it marks the U.S. returning to the crypto race.

The integration of cryptocurrencies into the daily financial system is a long process, but now this process has officially begun—and with clear and explicit rules, its pace is accelerating.

The road to a truly on-chain financial system is now open, and at least in my view, its prospects are worth optimistic anticipation.