On September 17th, the SEC approved generic listing standards for ETP cryptocurrencies, shortening the launch timeline to 75 days and opening the door to plain vanilla products.
Bitwise predicts that more than 100 crypto-linked ETFs will be launched in 2026. James Seifert, senior ETF analyst at Bloomberg, supported this call, but added a caveat:
“There's going to be a lot of liquidation.”
The combination of explosive growth and rapid culling will define the next stage, as prevailing standards solve timing problems rather than liquidity problems. For Bitcoin, Ethereum, and Solana, the flood strengthens their dominance. For everything else, it's a stress test.
The new rules mirror what the SEC did for stock and bond ETFs in 2019, when the number of annual creations jumped from 117 to more than 370. Fee reductions quickly followed, with dozens of small funds closing within two years.
Crypto runs the same experiment with worse starting conditions. Custody is highly concentrated: Coinbase holds the assets of the majority of crypto ETFs, claiming up to an 85% share of the world’s Bitcoin ETFs.
Additionally, APs and market makers rely on a small number of locations for pricing and borrowing, and many altcoins lack the derivative depth to hedge creation/redemption flows without moving the market.
The SEC's July 29 in-kind order allowed Bitcoin and Ethereum trusts to settle their creations in physical coins rather than cash, increasing tracking, but required AP to manage procurement, holding, and tax treatment on a basket-by-basket basis. In the case of BTC and ETH, it is manageable.
If the underlying assets are thin, increased volatility could completely dry up borrowings, forcing creation to halt until supply returns, and the ETF could trade at a premium.
Piping under load
APs and market makers can handle higher creation/redemption volumes of liquid coins. Its limitation is short availability. This means that when a new ETF is launched with a token that borrows less, the AP will either demand a wider spread or pull back entirely, leaving the fund to trade in cash creation with higher tracking error.
Exchanges could halt trading if base price updates stop, a risk that Dechert's October analysis highlighted even under a faster approval path.
Coinbase's first mover custody position is now both a source of revenue and a goal. US Bancorp is reviving its institutional Bitcoin custody plan, and Citi and State Street are exploring custody relationships for cryptocurrencies and ETFs.
Their pitch is: Do you want 85% of your ETF flows to depend on a single counterparty? For Coinbase, more ETFs means more fees, more regulatory attention, and more risk that a single operational glitch could threaten the entire category.
Index providers have quiet power. Generic standards tie eligibility to reference indices that meet monitoring agreements and exchange criteria, and restrict who designs benchmarks. A few companies, such as CF Benchmarks, MVIS, and S&P, dominate traditional ETF index management.
Cryptocurrencies are following the same pattern of wealth platforms defaulting to indexes they recognize, making it difficult for new entrants to break through, even with superior methodologies.
| 2026 launch bucket | Possible basis/example (using Seyffart queue as context) | storage memo | Index/Benchmark Notes | AP/Create ~ Redeem & Spread Notes | Do I still need a 19b-4? |
|---|---|---|---|---|---|
| Single asset major: BTC/ETH “me-too” and fee-reduction clones | Increase in zero-fee or low-fee spot BTC/ETH ETFs from second-tier issuers. Possible variants for share classes and currency hedging | Coinbase still holds over 80% share of BTC/ETH ETF assets and dominates the custody of the ETF. Some banks (US Bank via NYDIG, Citi, etc.) have re-entered the market, but on a smaller scale. Concentration risk will remain high unless regulators encourage diversification. | Mainly direct spot exposure. No index provider or simple NAV calculation from a single reference rate. CF Benchmarks, CoinDesk, and Bloomberg Galaxy benchmarks are used for NAV and marketing rather than portfolio rules. | The SEC now allows in-kind creation/redemption of crypto ETPs, allowing APs to send and receive native BTC/ETH instead of cash, reducing spreads and slippage. Plumbing is largely “solved” so competition is primarily on price and marketing. | No, as long as the product meets the general commodity-based trust stock criteria and the underlying asset meets the ISG/futures criteria. Exchanges can list without a new 19b-4. |
| Single-asset altcoins that meet common criteria | SOL, XRP, DOGE, LTC, LINK, AVAX, DOT, SHIB, XLM, HBAR, etc. Already own, or are close to owning, eligible regulated futures or ETF exposures. | Custody is thinner and more centralized with Coinbase and a small number of experts who actually support each coin at an institutional scale. Smaller custodians will struggle to sign enough powers of attorney to amortize security and insurance costs. | Some funds will be pure single asset. If the spot market is fragmented, some stocks may wrap futures-linked or blended indices. Indexers (CF, CoinDesk, Bloomberg Galaxy, Galaxy, etc.) have gained influence as “gatekeepers” where markets value pricing and monitoring. | AP faces real borrowing and short selling constraints in a thin market. Even if spot trading is allowed, borrowing for hedging is harder to find than with BTC/ETH, so spreads can be wider and creation more temporary. We expect 'non-arbor periods', where tracking errors occur when funding or borrowing spikes, to become more frequent. | If each underlying asset meets the general futures/ISG test, the answer is often “no.” However, assets without eligible futures market or ETF exposure will not pass the general test and will still require a custom 19b-4 to be listed. |
| Single Asset Long Tail ETP and Meme Coin ETP | Trump, Bonk, Hype, Niche Gaming and DeFi Tokens in Application Queue, Lack of Highly Regulated Futures and Spot Markets for ISG Members | These products can rely on smaller or offshore custodians, as few top custodians are willing to touch truly illiquid stocks. As a result, operational and cyber risks will be concentrated in companies with already weak fundamentals. | Pricing is more likely to rely on a composite index constructed from a small number of centralized exchanges. Manipulation and wash trading at these venues directly taints NAV. The index provider's methodology becomes a key systemic risk variable. | The AP is often an affiliate of the issuing company itself or a group of small trading companies that wish to warehouse their inventory. APs do not want to hold the underlying assets, so even if in-kind is allowed, creation/redemption may actually be cash-only. Expect chronic wide spreads, persistent NAV discounts/premiums, and frequent creation halts due to illiquidity. | In most cases, yes. Unless there are eligible futures or ETFs that already provide 40% or more exposure under the generic test, these ETPs fall outside the scope of the generic standard and must use the traditional, slower 19b-4 path if approved. |
| Broad Large Cap and “Top N” Index ETPs | GLDC style large-cap basket (e.g. BTC, ETH, XRP, SOL, ADA), “Top 5/10 Market Cap”, or “BTC+ETH+SOL” blend. Many of the Seyffart chart basket/index products can be found here | Custody is typically consolidated into a single provider across all components, simplifying collateral and operational workflows. This amplifies the “single point of failure” problem if the dominant custodian goes down. | Indices such as CF Benchmarks, CoinDesk, Bloomberg Galaxy, and Galaxy determine inclusion rules, weights, and rebalancing. Under the General Standards, index design is limited by what is already eligible, as all components must meet unique monitoring/futures tests. | Although there are more items to create/redeem per basket, AP can net flows across components and use physical baskets to reduce slippage. The main plumbing risk is the rebalancing day, when several thin altos need to be passed at once. | No for “plain vanilla” index trusts where all component assets meet the general criteria. |
| Thematic/Sector Index ETP | A mix of qualified and unqualified names, such as “L1/L2 Smart Contract Index,” “DeFi Blue Chip,” “Tokenization Play,” and “Meme Basket” | If a given token is only supported by a niche custodian, custody becomes multi-provider, complicating collateral management and increasing coordination and cyber risk. | Indexers must choose between maintaining thematic purity and staying within a general framework. Many companies publish both broad “research” indexes and more limited investable versions. | AP needs to source multiple illiquid names at once, making the creation vulnerable. If one component breaks, the entire ETP creation can stop. | In many cases, yes. If there is even one asset in the index that fails the futures/ISG test, the exchange loses its general safety margin. |
| Options – Single asset BTC/ETH overlay | Buy-write BTC or ETH ETFs, loss buffer strategies, colored products holding spot or futures, and short options. | It uses the same custodian as the regular BTC/ETH product, but adds derivatives plumbing. Collateral and margin are the main operational risks. | Some track buy-write indices. Others are actively managed. These are no longer simple commodity trust structures. | APs must manage both spot and options liquidity. If volatility spikes, creation of works may pause and NAV may fluctuate significantly. | In most cases, yes. ETPs that are actively managed and exploited or are “new features” are not covered by the generic standard. |
| Options – Multi-asset or thematic index overlays | “Cryptocurrency Income” Fund writes calls to crypto ETPs in a basket (BTC+ETH+SOL), volatility target or risk parity | Requires multiple asset custody and derivatives infrastructure. A failure in any layer can halt trading. | Custom indexes and proprietary overlays increase differentiation but reduce comparability and platform adoption. | APs face thin alternatives, limited options markets, and complex hedging models, which mean high costs and wide spreads. | yes. These are outside of the general template and require full 19b-4 approval. |
selection
ETF.com tracks dozens of closures each year, with funds under $50 million struggling to cover costs and often closing within two years.
Seifert predicts that crypto ETFs will be liquidated by the end of 2026 or early 2027. The most vulnerable are overlapping single-asset funds with high fees, niche index products, and thematic bets where the underlying market moves faster than an ETF wrapper can accommodate.
The price war will accelerate the selection. New Bitcoin ETFs will launch in 2024 at 20-25 basis points, less than half of previous applicants. As shelves become more crowded, issuers cut prices further on their flagship products, and long-tail funds are unable to compete on fees and performance.
Secondary market structures first crack when the underlying foundation is thin. If the ETF holds small-cap tokens with borrowing limits, the surge in demand will force a premium until AP raises enough coins.
If the borrowing runs out during volatility, AP will stop creating and the premium will continue.
Some early crypto index ETFs saw net redemptions and persistent discounts as investors stuck with branded single-asset funds and traded away from mispricing.
For BTC, ETH, and SOL, the dynamic relationship is reversed. More ETF wrappers are deepening their ties to spot derivatives, tightening spreads and strengthening their position as core institutional collateral.
Bitwise predicts that ETFs will absorb more than 100% of the net new supply of these three assets, creating a feedback loop of larger ETF complexes, deeper borrowing markets, tighter spreads, and increased appeal to advisors who are prohibited from owning the coins directly.
What do the rules still gate and who decides?
The general standard excludes “new feature” ETPs that are actively managed and exploited and require the submission of a separate 19b-4 proposal.
Want to launch a passively managed spot BTC ETF? 75 days. Want 2x leverage with daily resets? Return to the old system.
SEC Commissioner Caroline Crenshaw warned that the standard could flood the market with products that skip individual reviews, creating interrelated vulnerabilities that regulators would discover only in a crisis.
This rule directs the flood to the most liquid and most institutionalized areas of cryptocurrencies.
The stakes are simple. Will ETF-palooza consolidate the institutional infrastructure of cryptocurrencies around a few dominant coins and custodians, or will it expand access and diversify risk?
For Bitcoin, the flood is a coronation. Each new wrapper adds new venues for institutional capital, new sources of borrowing, and new reasons for banks to build custody.
Coinbase's assets under custody reached $300 billion in the third quarter of 2025. Its scale creates network effects and vulnerabilities.
For the long tail, a larger number of ETFs not only increases legitimacy but also increases fragmentation, dilutes product-specific liquidity, and increases the likelihood that certain funds will be shut down.
Issuers are betting that a small number of companies will survive and subsidize the rest. AP is betting that it can extract the spread and borrow fees before someone gets stuck holding illiquid tokens during a wave of redemptions.
Custodians believe that concentration is more profitable than competition until regulators and customers force them to diversify.
Universal standards have made it easier to launch crypto ETFs. They didn't make it easy to keep them alive.
