SEC Finalizes New Disclosure Rules for Crypto ETFs
New SEC rules require crypto ETFs to clearly disclose risks, prohibit misleading language, and standardize investor information.
New requirements mandate standardized risk disclosures for spot Bitcoin and other digital asset funds.
The Securities and Exchange Commission has adopted new rules requiring exchange-traded funds (ETFs) that invest in cryptocurrencies, including spot Bitcoin ETFs, to provide standardized risk disclosures in their prospectuses and marketing materials. The rule change applies to both new and existing funds and is aimed at enhancing investor understanding of crypto-related risks.
The finalized rules, announced July 1, amend Form N-1A, which mutual funds and ETFs use to register offerings. Under the new requirements, any fund that invests in crypto assets must include clear language describing the unique risks associated with those assets. This includes custody concerns, market volatility, technological uncertainty, and regulatory developments.
The SEC’s order explicitly defines a “crypto asset” as “an asset that is issued and/or transferred using distributed ledger or blockchain technology using cryptographic techniques,” which includes popular assets like Bitcoin and Ethereum. Funds must state in plain language that they invest in these types of assets and summarize the associated risks in the prospectus summary section.
The rule also prohibits funds from describing crypto assets as “currencies” unless they are recognized as legal tender by at least one government. This provision aims to prevent misleading characterizations in marketing documents and aligns with prior SEC warnings about overstating the stability or utility of digital tokens.
The new disclosure requirements follow the SEC’s January 2024 approval of the first U.S. spot Bitcoin ETFs. Since that approval, several asset managers—including BlackRock, Fidelity, and Ark Invest—have launched funds tracking the price of Bitcoin. These products have quickly amassed significant assets under management, prompting the SEC to act on consistent disclosures for retail investors.
Funds already in operation will have to comply with the updated rules by their next annual update. New funds must comply at launch.
The SEC emphasized that while the disclosure rules do not constitute an endorsement or approval of crypto assets, they are intended to promote transparency and consistency across the fast-growing ETF market segment.