WASHINGTON, D.C.—Director of Securities Policy Benjamin Schiffrin issued the following statement on the filing of Better Markets’ Supplemental Comment Letter to the Securities and Exchange Commission (SEC) in response to proposed rule changes filed by national securities exchanges to list and trade shares in spot ether exchange-traded products (ETPs), with the SEC set to rule on the first such proposed rule change by May 23, 2024:

“The stakes for retail investors are enormous.  The crypto industry remains plagued by fraud, scams, and abuses, but the SEC’s approval of spot bitcoin ETPs has allowed the industry to peddle some of its products to retail investors with a veneer of legitimacy.  This means that when the next crypto crash inevitably occurs, retail investors are the ones that will be harmed.  The approval of spot ether ETPs would only further endanger retail investors.  It would allow the crypto industry to portray another product backed by an unstable and volatile asset as a mainstream financial instrument that has the SEC’s blessing.

“In our prior comment letter, which we submitted two days after the SEC approved spot bitcoin ETPs, we said that that approval was a mistake that threatened to harm countless investors and that the SEC should not compound that mistake by approving spot ether ETPs.  The experience with spot bitcoin ETPs in the four months since their approval shows why spot ether ETPs should not also be approved.  Although some said that the SEC’s approval of spot bitcoin ETPs would dampen bitcoin’s volatility, that has not proven to be the case.  Instead, it appears that swings in the price of bitcoin are only becoming more intense.  Ether is no less prone to extreme price volatility than is bitcoin, which makes investing in ether little more than a gamble.  In these circumstances, the SEC cannot approve spot ether ETPs consistently with its mission to protect investors and the public interest.

“Moreover, the approval of spot ether ETPs would threaten not just investors but also the broader financial system.  The SEC’s approval of spot bitcoin ETPs already further entangled crypto with the rest of the financial world, which creates financial stability risks due to bitcoin’s extreme volatility. Approving spot ether ETPs would further interweave the crypto industry with traditional finance and aggravate these systemic risks.”

The Supplemental Comment Letter can be found here.