Galaxy: Which altcoin ETFs may receive fast-track approval from the US SEC?

Overview

On July 30th, the Chicago Board Options Exchange (Cboe)'s BZX Exchange, Nasdaq, and NYSE Arca filed Form 19b-4 with the US Securities and Exchange Commission (SEC), proposing to establish listing standards for cryptocurrency exchange-traded funds (ETFs) and expedite the process for public trading. Cryptocurrency ETF applications have surged over the past year since the first Bitcoin exchange-traded products (ETPs) were approved in 2024. According to James Seyffert of Bloomberg Intelligence, there are currently 91 pending cryptocurrency ETF applications, including 24 applications for single tokens and index funds (see the appendix for a full list). This has led to a backlog for the SEC, which must navigate a cumbersome approval process for new asset classes without clear rules governing what should and should not be approved. A 19b-4 filing is a document submitted to the SEC by self-regulatory organizations, such as exchanges, proposing rule changes. Following submission, there is a 21-day public comment period, during which the SEC will decide to approve, reject, or extend its review within an initial 45-day period. The SEC can extend its review period by up to 240 days from the date of submission. The comment period for these proposals closed on August 25. The initial approval deadline is September 13, with a maximum deadline for final approval of March 27, 2026. While the US SEC has historically experienced the longest approval times for cryptocurrency ETP applications, the proposed rule changes in this case will significantly reduce the agency's burden in dealing with the massive and growing volume of cryptocurrency ETP applications. Combined with the SEC's increasingly friendly stance toward cryptocurrencies, we believe the SEC is likely to make a final decision before the March 2026 deadline. The need for an expedited approval process for cryptocurrency ETFs has precedent in the traditional stock market, which has also experienced a similar surge in issuance. In September 2019, the US SEC adopted Rule 6c-11 (commonly referred to as "Rule ETF"), which aims to modernize the regulatory framework for ETFs. The rule allows most ETFs that meet standardized criteria, such as daily portfolio transparency, flexibility in creating and redeeming portfolios, and full disclosure of net asset value (NAV), premiums/discounts, bid-ask spreads, and holdings on their websites, to operate under the Investment Company Act of 1940 without the need for a separate exemption.

The passage of this rule revolutionized the ETF market. Previously, ETF sponsors had to apply for and obtain exemptions on a case-by-case basis, a process that could take months or even years, a dilemma the cryptocurrency ETF industry faces today. The ETF rule significantly reduced the time and cost required to launch an ETF. Today, there are more listed ETFs than individual stocks. Data source: Morningstar, as of August 25th. There are clear parallels with the crypto ETF market. Just as Rule 6c-11 shifted traditional ETFs from a cumbersome, case-by-case approval system to a standardized, fast-track system, a similar approach for crypto ETFs would bring benefits such as certainty, efficiency, and broader market access. The exponential growth of traditional ETFs following the 2019 rule's implementation demonstrates that innovation and investor choice can rapidly expand when regulatory friction is reduced. Today, crypto ETFs are at the same inflection point as equity ETFs prior to 2019, stalled by regulatory bottlenecks despite significant demand and market readiness. A fast-track framework based on objective, quantitative metrics (described below) would provide the SEC with the same expanded oversight capabilities without sacrificing investor protection. The applications submitted by the Chicago Board Options Exchange (Cboe) BZX, Nasdaq, and NYSE Arca focus on three criteria for tokens to qualify for fast-track approval. The exchanges propose that if any one of these criteria is met, the token's accompanying ETP should qualify for the fast-track process. Collectively, these criteria aim to establish objective, standardized thresholds for tokens to qualify for expedited review. They take into account market maturity, regulatory oversight, and investor familiarity.

Condition 1: “The commodity is traded on a market that is a member of the Intermarket Surveillance Group (ISG); however, the exchange may obtain information about trading in the commodity from ISG members.”

Comment:This ensures that the underlying token is traded on a market that is a member of the ISG, providing exchanges and the SEC with the cross-market visibility needed to detect manipulative or illicit trading.

Condition 2:“The commodity underlies a futures contract that has been traded on a designated contract market for at least six months; provided that the exchange has a comprehensive surveillance-sharing agreement with the designated contract market, either directly or through joint membership in the ISG.”

Comment:This leverages regulated futures markets (CFTC regulated, with at least six months of trading history) as signals of depth, liquidity, and established surveillance protocols.

Condition 3: "Initially only, an exchange-traded fund designed to provide at least 40% of its net asset value in economic exposure to commodities listed and traded on a national securities exchange."

Comment: This suggests that if a traditional ETF already provides ≥40% exposure to an asset on a national exchange, then the token has achieved a certain level of institutional recognition and market infrastructure.

Eligible Tokens

Galaxy Research reviewed the top 100 tokens by market capitalization to determine which ones met the above criteria or would soon qualify for fast-track listing (BTC and ETH have been excluded from the following analysis because they already have ETFs).

A total of 10 tokens met the fast-track listing criteria: DOGE, BCH, LTC, LINK, XLM, AVAX, SHIB, DOT, SOL, and HBAR Additionally, ADA and XRP will soon qualify, as they must have been traded on a Designated Contract Market (DCM) for six months following their initial listing. Below is a breakdown of the tokens eligible for fast-track listing: Condition 1: No tokens other than BTC and ETH meet the criteria, as none trade on an ISG member market. While Coinbase's derivatives exchange is an ISG member, the tokens traded there are derivatives, not spot assets, and therefore do not meet this criterion. This situation may change over the coming year, as ongoing initiatives, including the "Crypto Sprint" announced by the U.S. Commodity Futures Trading Commission (CFTC) on August 1, aim to enable spot cryptocurrency trading on DCMs. Furthermore, Project Crypto, launched by the US SEC on August 5th, will explore the possibility of enabling spot cryptocurrency trading on national securities exchanges (NSEs), which would materially alter the assessment under this standard. Condition 2: DOGE, LINK, XLM, BCH, AVAX, LTC, SHIB, DOT, SOL, and HBAR would all qualify as they have been listed on Coinbase Derivatives (which meets the definition of a DCM with a comprehensive surveillance sharing agreement) for more than six months. ADA and XRP are the only tokens traded on DCMs that do not meet the criteria due to a lack of a six-month trading history, but they will reach six months of maturity in September and October, respectively. Of the 12 tokens that qualify (or will soon qualify), only 9 have outstanding ETF applications (DOGE, LTC, LINK, AVAX, DOT, SOL, HBAR, XRP, and ADA). Given that these tokens qualify for the proposed fast-track rule, we believe they are more likely to launch ETFs, especially if the rule is passed. Condition 3: XRP and SOL may also qualify as they are listed on national exchanges and their underlying tokens have a net asset value of “not less than 40%.” Strictly speaking, these ETFs are futures ETFs tracking XRP and SOL contracts, but given that the futures track the spot price of the tokens, we believe they may also qualify. While the proposal only identifies the three fast-track listing criteria, the exchanges said in their filing that they will also submit a “separate rule proposal to add quantitative metrics as additional eligibility criteria.” The exchanges haven’t disclosed the specifics of those metrics, but journalist Eleanor Terett reported in July that the SEC was developing common listing criteria, such as trading volume and liquidity, to allow ETFs to receive fast-track approval within 75 days of filing an S-1 (a mandatory SEC filing for initial public offerings and certain other new securities offerings). Based on the report and our own assessment, possible quantitative criteria include: Trading Volume: Minimum average daily trading volume on a registered exchange over a specified lookback period (i.e., 30 or 90 days). Liquidity/Bid-Ask Spread: Demonstration of tight spreads and sufficient order book depth to support efficient ETF creation and redemptions. Market Cap/Circulating Supply: Minimum circulating market capitalization threshold to ensure only widely held assets qualify. Custody/Infrastructure Readiness: Availability of a regulated custodian capable of securely handling assets at scale. Price History: Minimum trading history (e.g., 6-12 months) to mitigate the risk of extreme volatility for newly issued tokens. On August 25, cryptocurrency industry organization The Digital Chamber and investment advisor Multicoin Capital Management submitted a comment letter on the proposed rule. Based on the aforementioned criteria, both companies proposed quantitative measures, requiring a minimum market capitalization of $500 million and daily trading volume of at least $50 million over the past six months. Multicoin's proposal goes further, requiring at least 5% of global trading volume, or an average of $10 million per day, to occur in the US market. These requirements would qualify the top 70 cryptocurrencies by market capitalization for expedited approval, provided they also meet one of the three initial criteria outlined in the Initial Exchange Expedited Approval Criteria. This aligns with the views 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 cryptocurrencies could qualify for ETFs."

CLARITY Act

As more tokens receive expedited approval, the Digital Asset Market Clarity Act ("CLARITY Act") could also provide additional criteria. This bill is currently under review in Congress and is being developed in consultation with the US SEC. The CLARITY Act would create a unified framework for digital assets in the United States; divide the regulatory authority of the SEC and CFTC; establish self-custody; protect developers from money transmitter laws; define when a token should be considered a security or commodity; and allow assets to be exempted from securities treatment if they are sufficiently decentralized ("mature" in the CLARITY Act). The CLARITY Act passed the House of Representatives with broad bipartisan support on July 17; similar legislation is currently being considered in the Senate. While the exact timeline remains uncertain, Wyoming Republican Senator Cynthia Loomis recently set a goal of sending a market structure bill to the President's desk "before the end of the year." Ultimately, if a bill passes the Senate, the two bills would need to be reconciled before being sent to the White House for signature into law. Under the "quantitative standards" in the CLARITY Act, the following additional criteria may be required: Control: Possession of "predetermined and non-discretionary automated rules or algorithms" that eliminate reliance on external parties to maintain custody during transactions. Open Source: The blockchain system's code must be fully open-source and publicly accessible, with transparent versioning and no participation restrictions. Node Participation: The blockchain must allow for public participation in node operation and validation, and quantitatively disclose the distribution and independence of validators. Exchanges may set thresholds, such as "no fewer than X validators" or "the top five validators control no more than 40% of the stake." Transactions and State Changes: The system must demonstrate a fully functional, programmatic ledger capable of transparently and predictably processing transactions and updating state. Metrics may include daily transactions, block intervals, and uptime reliability. Governance: No individual or affiliated group may hold more than 20% of governance/voting power, and decisions must be rule-based and transparent. Exchanges may be required to demonstrate decentralized governance mechanisms (on-chain voting, community proposals) and publicly document upgrade processes. Decentralization threshold: Requires wider ownership dispersion; no issuer or affiliate may own or control 20% or more of the total token supply. Issuance cap: The total value of exempt issuances in any 12-month period may not exceed $50 million. Relatedness restriction: Tokens held by insiders must be locked up for 12 months prior to maturity, with annual sales capped at 10% of the supply after maturity. As more tokens are listed on regulated futures markets, these standards may become necessary to distinguish between assets that truly embody decentralization, technological resilience, and investor protections and those that are merely liquid or widely traded. In this sense, the CLARITY Act may provide a blueprint for distinguishing between tokens that have reached sufficient maturity to merit ETF inclusion and those that remain centralized, underdeveloped, or opaque. In summary, the combination of exchange-proposed quantitative metrics and legislative maturity standards should ensure expedited approvals covering a broad range of large-cap, well-distributed tokens, while excluding projects that pose structural risks to investors and the market. The lessons from the traditional ETF market are clear: a rules-based framework accelerates innovation while protecting investor rights. Rule 6c-11 eliminated the case-by-case exemption system and replaced it with transparent, standardized requirements, triggering a wave of equity ETF issuances. Cryptocurrency ETFs now find themselves in the same position. By adopting a similar expedited approval process based on objective criteria, the SEC can manage the growing backlog of applications, provide clear guidance to issuers, and expand regulatory access to digital assets. The lack of regulation for cryptocurrency ETFs has not dampened investment demand. Instead, it has driven capital toward alternatives such as digital asset treasury companies, private trusts, and structured products. These instruments have proliferated as alternatives to ETFs, but they often offer higher fees, lower transparency, and weaker investor protections. The rapid growth of digital asset treasury companies (see Galaxy Digital's "The Rise of Digital Asset Treasury Companies") 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 this activity into safer, more efficient, and better-regulated structures. Whatever the final standards, they should serve more as a filter for fringe or thinly traded tokens than a barrier to mature assets that have been delayed solely due to SEC jurisdictional concerns. This means the next wave of ETF approvals will focus on projects with high market capitalization, strong liquidity, and that meet yet-to-be-defined quantitative criteria. This will likely encompass all assets that already meet at least one of the three criteria currently proposed by the CBOE, Nasdaq, and the NYSE.

Appendix

The full list of outstanding ETF applications, as reported by James Seyffert of Bloomberg Intelligence, is below: