Amid the US government shutdown, a thought emerges: Will new cryptocurrency ETP regulations be a watershed moment for the industry?

Amid the ongoing U.S. government shutdown, the SEC's recent approval of universal listing standards for cryptocurrency exchange-traded products (ETPs) is seen as a watershed moment for the industry. This decision simplifies the listing process, enabling faster and more diverse crypto ETP launches, and integrates digital assets into mainstream finance.

Key impacts of the new regulations include:

Shortened Approval Cycle: The review period for new ETPs is reduced from up to 240 days to as little as 75 days, lowering costs and encouraging more product launches, including for tokens like SOL and XRP.
Access for Financial Advisors: Advisors can now include crypto assets in portfolios more easily. Products like the Grayscale Crypto 5 Index ETF allow diversified exposure, making crypto accessible in standard accounts, including IRAs.
Integration with Banking: Regulated ETPs enable banks, such as JPMorgan Chase, to accept crypto ETF shares as loan collateral, deepening ties between cryptocurrencies and traditional finance.
Boost to Innovation: Clear regulatory guidelines encourage new products, from multi-currency ETPs to tokenized funds, helping the U.S. maintain competitiveness and support an "on-chain future."

This shift marks a significant step in recognizing cryptocurrencies as a legitimate part of investment portfolios, benefiting advisors, investors, and innovators alike.

As the U.S. government shutdown continues, now is a good time to step back and examine a key decision made by the SEC.

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

The SEC recently took a low-key but landmark turn: approving universal listing standards for cryptocurrency exchange-traded products (ETPs).

This means that exchanges can list each eligible cryptocurrency ETP without having to submit a separate regulatory application. This structural change ends the years of uncertainty surrounding the “case-by-case” review of ETPs.

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

The following four reasons determine that this new regulation is a watershed moment for the cryptocurrency industry:

1. The cycle is shortened, and the new ETP is more feasible

Previously, each ETP was subject to a lengthy SEC review process, which could take up to 240 days. Under the new regulations, new products that meet pre-set criteria can be launched in as little as 75 days, a remarkable feat by regulatory standards.

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

The shortened review cycle makes more strategies economically feasible, and the ETP product pipeline is enriched accordingly.

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

For the cryptocurrency industry, which has long been stuck in an audit deadlock, this is undoubtedly the sounding of the "starting gun".

2. Financial advisors can finally include crypto assets in their portfolios

Previously, incorporating cryptocurrencies into traditional investment portfolios faced numerous obstacles. While a handful of Bitcoin and Ethereum funds have emerged over the past two years, many mainstream brokerages and registered investment advisors (RIAs) have shied away from cryptocurrencies.

A typical example is Vanguard Group, which has an asset management scale of US$10 trillion. The institution has always refused to provide customers with investment channels for spot Bitcoin ETFs.

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

The SEC's new rules open the door for these investors and advisors. With a streamlined listing path for diversified cryptocurrency ETPs, advisors can now offer clients index-like cryptocurrency exposure through familiar platforms.

Within 48 hours of the new regulations being introduced, Grayscale Investments received approval to transform its "Digital Large Cap Fund" into the "Grayscale Crypto 5 Index ETF."

While the product remains on hold and will not begin trading until final approval is received, the transition will allow its clients to invest in a basket of the five largest cryptocurrencies by market capitalization.

With these products, wealth managers can now allocate to cryptocurrencies as easily as they allocate to an S&P 500 index fund or a gold fund.

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 incorporate cryptocurrencies into their asset rebalancing strategies without complex operational processes or regulatory challenges.

3. Regulated ETPs drive the integration of cryptocurrencies and banking

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

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

JPMorgan Chase, a long-time cryptocurrency skeptic, recently announced that it would accept cryptocurrency ETF shares as loan collateral, similar to the margin lending model that uses stock ETFs as collateral.

As more ETPs come under standard custody and reporting systems, banks will be more willing to lend against these assets.

The ability to use cryptocurrency holdings as collateral for borrowing makes cryptocurrencies “active participants” in 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 give rise to a new wave of innovation

Perhaps the most noteworthy change in this transformation is the adjustment of core concepts at the regulatory level.

After years of uncertainty, U.S. regulators are finally signaling that cryptocurrencies should be integrated into the existing financial system, not kept outside of it.

SEC Chairman Paul Atkins has launched the "Cryptocurrency Initiative," instructing the SEC to sort out relevant provisions of securities laws to pave the way for the market to migrate to the chain.

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

Currently, traditional financial institutions and startups have begun to compete to launch products based on the updated rules, ranging from multi-currency index ETPs to experimental interest-bearing token funds.

The results of this transformation will not only lead to the emergence of new ETPs, but will also be a test of America’s competitiveness. In the future, we may see tokenized real estate ETFs or other thematic cryptocurrency products.

If the US sets the rules, innovation will take hold; if not, it will flow overseas. By rapidly incorporating cryptocurrencies into mainstream financial products and explicitly supporting an "on-chain future," the US government is ensuring the US remains competitive in the cryptocurrency space and may even reclaim its leading position.

This rule adjustment is one of the most significant changes to the cryptocurrency industry in recent years.

This is not just about ETPs themselves, but also about cryptocurrencies being recognized as a legitimate component of modern investment portfolios.

For financial advisors, this means the ability to more comprehensively meet client needs; for investors, it brings more choices and convenience; for innovators, it marks the return of the United States to the cryptocurrency track.

The integration of cryptocurrencies into the everyday financial system has been a long process, but it has now officially begun—and is accelerating, driven by clear and unambiguous rules.

The road to a true on-chain financial system has been opened, and at least in my opinion, its prospects are worth looking forward to.