On 21 October 2024, the SEC’s Division of Examinations (Division) published its 2025 Examination Priorities (Priorities) to provide insight into what the Division plans to focus on in the 2025 fiscal year. In addition to other areas of risk highlighted in the Priorities, the Division has advised that it will to continue to monitor – and conduct examinations if deemed appropriate – of registrants offering crypto asset-related services, including spot bitcoin or ether exchange-traded products (ETPs). However, with respect to spot bitcoin or ether ETPs, the Division’s oversight may be limited to the ETPs’ sponsors or managers rather than the ETPs themselves.

The Priorities convey that examinations will review whether registrants, including ETPs, among other things, routinely review, update, and enhance their compliance practices (including custody practices and valuation procedures), risk disclosures, and operational resiliency practices (e.g., data integrity and business continuity plans). The Division will also assess registrants’ practices to address technological risks, including those pertaining to crypto asset security.

The SEC’s focus on crypto asset markets and related registrants, including digital asset ETPs, in the Priorities is not surprising, particularly since cryptocurrency has been a topic of examinations in previous years – and in light of the new spot bitcoin and ether ETPs that emerged in early 2024. In January of this year, the SEC declared effective the registration statements of ten bitcoin ETPs and approved their listing on one of the major stock exchanges. Subsequently, certain spot ether ETPs were approved for trading in July 2024. Statements by Chair Gensler regarding these approvals indicated his view that investors should be cautious and aware of the risks relating to such products. As such, the Priorities highlight a similar sentiment, and spot bitcoin and ether ETPs or their managers should be prepared to respond to questions from the Division.