Overview
On July 30, Cboe's BZX Exchange, Nasdaq, and NYSE Arca filed Form 19b-4 with the U.S. Securities and Exchange Commission (SEC), proposing listing standards for cryptocurrency exchange-traded funds (ETFs) and expediting the process for public trading. Since the approval of the first batch of Bitcoin exchange-traded products (ETPs) in 2024, cryptocurrency ETF applications have surged over the past year. According to James Seyffart of Bloomberg Intelligence, there are currently 91 pending cryptocurrency ETF applications, including 24 single-token applications and index fund applications (see Appendix for the full list). This has created a backlog at the SEC, which must navigate a cumbersome approval process for a new asset class with unclear guidelines on which applications should be approved or denied.
A Form 19b-4 filing is a document submitted by self-regulatory organizations, such as exchanges, to the U.S. SEC to propose rule changes. After submission, a 21-day public comment period begins, and the SEC must decide to approve, deny, or extend the review period within an initial 45-day timeframe. The SEC can extend the review period up to 240 days from the filing date. The comment periods for these proposals ended on August 25. The initial approval deadline is September 13, with the final approval deadline extending to March 27, 2026.
Although the U.S. SEC has historically taken the longest time to review cryptocurrency ETP applications, the proposed rule changes in this case would significantly reduce the agency's burden in handling the vast and growing number of cryptocurrency ETP applications. Coupled with the SEC's more crypto-friendly stance, we believe the U.S. SEC may reach a final decision before the March 2026 deadline.
Expedited Process Rules for Traditional Equity ETFs
The need for an expedited approval process for cryptocurrency ETFs has a precedent in traditional equity markets, where the ETF market experienced a similar surge in issuances. In September 2019, the U.S. SEC adopted Rule 6c-11 (commonly known as the "ETF Rule"), aimed at modernizing the regulatory framework for ETFs. This rule allows most ETFs meeting standardized conditions—such as daily portfolio transparency, flexibility in creation and redemption baskets, and comprehensive disclosure of net asset value (NAV), premium/discount, bid-ask spreads, and holdings on their websites—to operate under the Investment Company Act of 1940 without needing individual exemptive orders.
The adoption of this rule revolutionized the ETF market. Previously, ETF sponsors had to apply for exemptions on a case-by-case basis, a process that could take months or even years—a predicament the cryptocurrency ETF industry faces today. The ETF Rule significantly reduced the time and cost required for ETF issuance. Today, the number of listed ETFs even exceeds the number of individual stocks.
There are clear parallels with the crypto ETF market. Just as Rule 6c-11 transitioned traditional ETFs from a cumbersome case-by-case approval system to a standardized expedited process, adopting a similar approach for crypto ETFs would bring benefits such as certainty, efficiency, and broader market access. The exponential growth of traditional ETFs after the 2019 rule implementation demonstrates that innovation and investor choice can expand rapidly when regulatory friction is reduced. Today, crypto ETFs are at the same inflection point as pre-2019 equity ETFs—stalled by regulatory bottlenecks despite massive demand and market readiness. An expedited framework based on objective quantitative metrics (discussed below) would give the SEC the same ability to scale oversight without sacrificing investor protection.
Proposed Criteria
The filings by Cboe BZX, Nasdaq, and NYSE Arca focus on three criteria for tokens to qualify for expedited approval. The exchanges propose that if a token meets any one of these conditions, its associated ETP should be eligible for an expedited approval process. Collectively, these criteria aim to establish objective, standardized thresholds for tokens to qualify for expedited review, considering market maturity, regulatory oversight, and investor familiarity.
Criterion 1: "The commodity is traded on a market that is a member of the Intermarket Surveillance Group (ISG); provided that the Exchange is able to obtain information regarding trading in the commodity from such ISG member."
Comment: This ensures the underlying token is traded on markets belonging to the Intermarket Surveillance Group, providing the cross-market visibility needed for exchanges and the SEC to detect manipulative or non-compliant trading.
Criterion 2: "The commodity is the underlying of a futures contract that has been trading on a designated contract market for at least six months; provided that the Exchange has a comprehensive surveillance-sharing agreement with such designated contract market, either directly or through common membership in the ISG."
Comment: This leverages regulated futures markets (oversight by the Commodity Futures Trading Commission and at least six months of trading history) as a signal of depth, liquidity, and established surveillance protocols.
Criterion 3: "Solely for an initial phase-in period, an exchange-traded fund that is designed to provide economic exposure of not less than 40% of its net asset value to a commodity that is listed and traded on a national securities exchange."
Comment: This indicates that if a traditional ETF already provides ≥40% asset exposure, the token has achieved a degree of institutional acceptance and market infrastructure.
Qualifying Tokens
Galaxy Research reviewed the top 100 tokens by market capitalization to determine which tokens meet the above criteria or are close to qualifying for expedited listing (BTC and ETH have been excluded from the following analysis as they already have ETFs).
In total, 10 tokens meet the expedited listing criteria: DOGE, BCH, LTC, LINK, XLM, AVAX, SHIB, DOT, SOL, and HBAR. Additionally, ADA and XRP will soon qualify, as they must complete six months of trading on a designated contract market (DCM) after their initial listing. Below is a breakdown of tokens meeting the expedited listing criteria:
Criterion 1: No tokens other than BTC and ETH currently qualify, as no tokens are traded on ISG member markets. Although Coinbase's derivatives exchange is an ISG member, the tokens traded there are derivatives, not spot assets, so they do not meet this criterion. This may change in the coming year, as ongoing initiatives, including the "Crypto Sprint" announced by the CFTC on August 1, aim to enable spot cryptocurrency trading on DCMs. Additionally, Project Crypto, launched by the U.S. SEC on August 5, will explore the possibility of spot cryptocurrency trading on national securities exchanges, which would substantially alter assessments under this criterion.
Criterion 2: DOGE, LINK, XLM, BCH, AVAX, LTC, SHIB, DOT, SOL, and HBAR should all qualify, as they have been listed on Coinbase Derivatives (which meets the definition of a DCM with comprehensive surveillance-sharing agreements) for over six months. ADA and XRP are the only tokens trading on a DCM that do not yet qualify due to lacking six months of trading history, but they will reach the six-month maturity in September and October, respectively. Of the 12 qualifying (or soon-to-qualify) tokens, only nine have pending ETF applications (DOGE, LTC, LINK, AVAX, DOT, SOL, HBAR, XRP, and ADA). Given that these tokens meet the proposed expedited rule criteria, we believe they are more likely to launch ETFs, with a high probability if the rule is adopted.
Criterion 3: XRP and SOL may also qualify, as they are both listed on national securities exchanges with "not less than 40%" of their net asset value in the underlying tokens. Strictly speaking, these ETFs are futures ETFs tracking XRP and SOL contracts, but since the futures track the spot prices of the tokens, we believe they may also qualify.
Evaluating Potential Future Quantitative Criteria
Although the proposal only specifies the three expedited listing criteria above, the exchanges stated in their filings that they will also submit "a separate rule proposal to add quantitative metrics as additional eligibility criteria." The exchanges have not disclosed the specifics of these metrics, but reporter Eleanor Terett reported in July that the SEC is developing universal listing standards, such as trading volume and liquidity, for ETFs to receive expedited approval within 75 days of filing an S-1 (a form required for IPOs and certain other new securities offerings).
Based on the report and our own assessment, potential quantitative criteria may include:
Trading Volume: Minimum average daily trading volume on registered exchanges over a specified lookback period (e.g., 30 or 90 days).
Liquidity/Bid-Ask Spreads: Demonstrating tight spreads and sufficient order book depth to support efficient ETF creation and redemption.
Market Cap/Circulating Supply: A minimum circulating market cap threshold to ensure only widely held assets qualify.
Custody/Infrastructure Readiness: Regulated custodians capable of securely handling assets at scale.
Price History: A minimum trading history (e.g., 6-12 months) to mitigate the risk of extreme volatility in newly issued tokens.
On August 25, crypto industry group The Digital Chamber and investment advisor Multicoin Capital Management submitted comment letters on the proposed rule. Based on the above criteria, both proposed quantitative measures requiring a minimum market cap of $500 million and at least $50 million in daily trading volume over the past six months. Multicoin's proposal went further, suggesting that at least 5% of global trading volume, or an average of $10 million daily, occur in U.S. markets. These requirements would make the top 70 cryptocurrencies by market cap eligible for expedited approval, provided they also meet one of the three initial criteria listed in the exchange's expedited approval standards. This aligns with the view of Bloomberg ETF analyst Eric Balchunas, who stated that he believes the criteria "are likely loose enough that the vast majority of the top 50 cryptos could be ETF'd."
The CLARITY Act
As more tokens become eligible for expedited approval, the Digital Asset Market Clarity Act ("CLARITY Act") may also provide additional criteria. The bill is under consideration in Congress and has been developed in consultation with the U.S. SEC. The CLARITY Act would create a unified framework for digital assets in the U.S.; delineate regulatory authority between the SEC and CFTC; affirm self-custody rights; protect developers from money transmitter laws; define when a token should be considered a security or commodity; and exempt assets from security treatment if they are sufficiently decentralized ("mature" under the CLARITY Act). On July 17, the CLARITY Act gained broad bipartisan support in the House; similar legislation is currently under consideration in the Senate. While the exact timeline remains uncertain, Wyoming Republican Senator Cynthia Lummis recently set a goal to get a market structure bill "on the President's desk by the end of the year." Ultimately, if the Senate passes a bill, the two would need to be reconciled before being sent to the White House to be signed into law.
Under the "quantitative criteria" in the CLARITY Act, the following additional standards may be required:
Control: Possession of "predetermined and non-discretionary automated rules or algorithms," eliminating reliance on external parties for custody during transactions.
Open Source: The blockchain system's code must be fully open source and publicly accessible, with transparent versions and no participation restrictions.
Node Participation: The blockchain must allow public participation in node operation and validation, with quantitative disclosure of validator distribution and independence. Exchanges may set thresholds, such as "no fewer than X validators" or "the top five validators controlling no more than 40% of the stake."
Transactions and State Changes: The system must demonstrate a fully functional, programmable ledger capable of processing transactions and updating state transparently and predictably. Metrics may include daily transaction count, block intervals, and uptime reliability.
Governance: No individual or affiliated group may hold more than 20% of governance/voting rights, and decisions must be rule-based and transparent. Exchanges may require proof of decentralized governance mechanisms (on-chain voting, community proposals) and publicly recorded upgrade processes.
Decentralization Threshold: Broader ownership dispersion is required; no issuer or affiliate may own or control 20% or more of the total token supply.
Issuance Cap: The total value of exempt issuance in any 12-month period must not exceed $50 million.
Affiliation Restrictions: Tokens held by insiders must be locked for 12 months before maturity, with a cap of 10% of supply sold annually after maturity.
As more tokens list on regulated futures markets, the above criteria may become necessary to distinguish which assets truly embody decentralization, technical resilience, and investor protection from those that are merely liquid or widely traded. In this sense, the CLARITY Act may provide a blueprint for differentiating tokens that have reached sufficient maturity to warrant ETF inclusion from those that remain centralized, underdeveloped, or opaque. In summary, the combination of quantitative metrics proposed by exchanges and legislative maturity standards should ensure that expedited approval covers a broad range of large-cap, well-distributed tokens while excluding those posing structural risks to investors and markets.
Conclusion
The lessons from the traditional ETF market are clear: a rules-based framework accelerates innovation while safeguarding investor interests. Rule 6c-11 eliminated the case-by-case exemptive order system and replaced it with transparent, standardized requirements, sparking a wave of equity ETF issuances. Cryptocurrency ETFs are now in the same position. By adopting a similar expedited approval process grounded in objective criteria, the SEC can manage the growing application backlog, provide clarity to issuers, and expand regulatory access to digital assets.
The lack of regulated cryptocurrency ETFs has not dampened investment demand. Instead, it has diverted capital to alternative products such as digital asset treasury companies, private trusts, and structured products. These instruments have proliferated as substitutes for ETFs, but they often come with higher fees, less transparency, and weaker investor protections. The rapid growth of digital asset treasury companies (see Galaxy Digital's "The Rise of Digital Asset Treasuries") demonstrates the scale of unmet demand and the risks of forcing investors into less regulated channels. A transparent, rules-based ETF framework would help migrate such activity into safer, more efficient, and regulated structures.
Whatever the final standards, they should act more as a filter for marginal or thinly traded tokens rather than a barrier for mature assets delayed solely due to SEC jurisdiction questions. This means the next wave of ETF approvals will focus on projects with high market capitalization, strong liquidity, and compliance with yet-to-be-determined quantitative criteria. This will likely encompass all assets that already meet at least one of the three criteria currently proposed by Cboe, Nasdaq, and NYSE Arca.
