Why is the US SEC Delaying Approval for Altcoin ETFs?

The U.S. Securities and Exchange Commission (SEC), under Chair Mark Uyeda, has delayed decisions on several altcoin exchange-traded funds (ETFs). These include proposals for Dogecoin (DOGE), Litecoin (LTC), Solana (SOL), and XRP.

This delay sparks questions about the SEC's continued reluctance to approve crypto-based financial products, despite growing market demand. However, experts remain optimistic about approval later this year. This article explores the reasons behind the delays and their implications for the future of crypto ETFs.

Seal of the U.S. Securities and Exchange Commission

SEC Delays Altcoin ETF Decisions

On March 11, 2025, the SEC announced delays for several prominent crypto ETF applications filed by firms including Grayscale, 21Shares, Canary Capital, and Bitwise. These filings covered well-known altcoins such as Dogecoin (DOGE), Litecoin (LTC), and XRP. While not unexpected—industry analysts consider this standard procedure—the delays are noteworthy.

A significant delayed filing is Grayscale's spot XRP ETF proposal, the first XRP ETF application acknowledged by the SEC. Although delayed, the SEC hasn't rejected the proposal, indicating a need for further analysis. This mirrors the SEC's handling of previous major crypto ETF filings.

Further delays affected Solana (SOL) ETF applications from VanEck, 21Shares, and Canary Capital. 21Shares also faced delays regarding its Ethereum (ETH) staking ETF filing.

Reasons for the Delays

Regulatory delays are common in the crypto space, particularly concerning ETFs. The SEC's cautious approach stems from concerns about market manipulation and the lack of comprehensive regulations. While demand for crypto ETFs is undeniable, and asset managers are keen to capitalize on this market, the SEC's hesitation reflects fears of excessive volatility and potential fraud.

Bloomberg ETF analyst James Seyffart explains that these delays are expected and align with typical application review procedures. He also notes that the pending confirmation of Paul Atkins as the new SEC chair might contribute to the delays.

However, Seyffart also suggests the SEC is nearing decisions. A new deadline of May 21, 2025, has been set for Grayscale's XRP ETF application, with a final decision potentially arriving in October, allowing for more thorough evaluation.

Seyffart maintains that the odds of altcoin ETF approval this year remain relatively high, with several applications expected to be approved later in 2025.

Growing Interest in XRP ETFs

Grayscale's XRP ETF application, the first spot XRP ETF acknowledged by the SEC, has generated considerable interest. Other major firms, including Bitwise and Canary Capital, have also filed XRP ETF applications, along with Franklin Templeton, intensifying competition.

Despite the SEC's seemingly slow process, the likelihood of altcoin ETF approval has improved. Seyffart estimates a 90% chance of approval for Litecoin (LTC), followed by Dogecoin (DOGE) at 75%. Solana (SOL) and XRP (XRP) have estimated approval chances of 65-70%.

This increased likelihood is partly due to the approval of Bitcoin ETFs, paving the way for other crypto ETFs. The growing interest from institutional investors further pressures the SEC to create regulated products allowing traditional investors access to the crypto market.

Importance of Crypto ETFs

Crypto ETFs are considered crucial for bringing transparency and regulation to the crypto market. They offer investors exposure to digital assets without directly holding them, appealing to institutional investors seeking regulated investment vehicles.

The SEC's thorough review process aims to ensure these ETFs meet standards of transparency, security, and market integrity, mitigating risks of market manipulation, fraud, and excessive volatility that could harm investors.