As crypto-related products begin to appear more frequently in registered investment vehicles, the SEC is drawing sharper regulatory lines for what is and isn’t acceptable in the realm of digital asset exposure.
For fund boards overseeing 40 Act funds and affiliated 33 Act ETFs, the latest regulatory signals from the SEC and its newly launched crypto task force carry important implications.
SEC commissioner Hester Peirce, who heads up the task force overhauling the agency’s approach to monitoring and regulating crypto investments, has said several times that the effort does not amount to a regulation-free green light for crypto product development.
The agency will continue to enforce the same investor-protection, anti-fraud, and money-laundering rules that apply to every other sector it regulates, she has said.
But she and SEC chair Paul Atkins have both said the agency should allow limited exposure to crypto assets in registered funds under strict conditions, and will expand the number of full crypto-focused ETFs it allows, especially among established ETF issuers.
The SEC’s Crypto Task Force recently issued two significant statements designed to bring clarity to the regulation of digital assets within registered investment vehicles. These updates, released on July 1 and July 9, reinforce that tokenized or blockchain-based securities must comply with existing federal securities laws, regardless of how novel the technology might seem.
“The SEC’s message is crystal clear,” said Ayesha Hunt, founder of Kelly Hunt PLLC and a legal advisor to fund boards. “Crypto exposure, whether small or significant, demands real-time, board-level governance, robust valuation practices, and tailored disclosure frameworks.”
Registered funds looking to include crypto or tokenized securities are now required to go beyond boilerplate language.
Disclosures must detail risks tied to valuation, custody, liquidity, and counterplay relationships.
“The days of [getting away with just] saying ‘subject to volatility’ are over,” she said.
Crypto oversight: New but not unique
Boards overseeing mutual funds and ETFs must not only understand the operational and compliance risks of crypto investments, but also document oversight actions such as how valuation methods are audited and what contingency plans exist in the event of cyberattacks or blockchain forks.
Peirce’s July 9 statement, titled “Enchanting, but Not Magical,” cautions that while blockchain may offer efficiency, tokenized securities remain securities under law and are subject to the same regulatory scrutiny as their off-chain counterparts.
Pierce pointed to new complexities arising when traditional securities are wrapped into blockchain-based tokens, often by third parties – complexities that fund boards will have to understand to properly oversee.
“These structures introduce unique risks,” Hunt said, including counterparty exposure and potential violations of disclosure rules. A token that fails to offer legal and beneficial ownership of the underlying asset may even qualify as a security-based swap, which is barred from retail trading under current rules.
Carolyn McPhillips, president of the Mutual Fund Directors Forum, said oversight fundamentals remain consistent. “Crypto isn’t different just because it’s new,” she said.
McPhillips emphasized that boards must evaluate the advisor’s rationale for including crypto assets and how the allocation fits within the fund’s objective and risk profile. “If I was on a board, I’d want to know: Is this exposure meant to hedge something? To enhance returns? To diversify? What’s the plan?”
said that boards should also assess how crypto affects the fund’s liquidity and valuation risk, particularly if the product involves direct crypto holdings rather than exchange-traded products. “You’re going to want to understand how the advisor thinks these products will function within the fund and whether your service providers, including auditors and custodians, have the capability to manage them,” she said.
Growth market
Despite the regulatory tightening, the digital asset fund market is expanding rapidly. Thirty-two digital asset ETFs have launched in 2025 so far, on track to surpass last year’s total launch of 33 funds.
There are 113 digital ETFs that together hold $179.7bn in AUM and pulled in $41bn in the past year.
The SEC is also actively reviewing Ethereum staking ETF proposals, with decisions expected as early as October. Approval of these products could pave the way for broader acceptance of staking-based crypto funds.
The SEC voted July 29 to normalize crypto investment products even further by approving in-kind creations and redemptions for ETPs
“This is a very crypto-friendly administration,” said Hunt. “The combination of regulatory clarity, a new tone from the SEC, and congressional momentum around stablecoin and digital asset legislation sets the stage for a broader product rollout.”
Congress is also taking steps to advance beyond the SEC’s view of allowable crypto investment products.
Republicans in the House of Representatives are moving forward on two major pieces of legislation: the GENIUS Act, a stablecoin oversight bill that has already passed the Senate and is poised to become the first standalone crypto law in US history, and the CLARITY Act, a more ambitious measure to define market structure across the digital asset ecosystem.
The CLARITY Act would establish when a digital asset qualifies as a security under the SEC’s purview versus when it’s a commodity to be overseen by the CFTC.
Potential for conflict
Both bills have wide support in both the House and Senate, but Senate Democrats continue to question the ethics of pro-crypto legislation amid rising concerns about how Donald Trump and members of his family may benefit from businesses they’ve launched in the growing crypto industry.
Asset managers, meanwhile, will continue to look for opportunities amidst the rapid, large-scale changes in what constitutes a “legitimate” crypto investment, even if they anticipate tough questions fund directors about the ethics, performance and risk involved.
“We’re going to see more advisers exploring what’s possible,” McPhillips said, noting that if crypto products continue to gain traction, fund boards will need to be prepared. “This is a space where governance practices may need to adapt quickly, but the board’s fundamental oversight responsibilities remain the same.”
New and mysterious or not, however, crypto-related strategies can still fit within traditional oversight structures, according to Matt Kaufman, CIO at Calamos Investments.
“These products gave you Bitcoin exposure, but inside a regulated framework,” Kaufman said. Calamos’ Bitcoin-linked ETF products are registered under the 40 Act and are overseen by a dedicated fund board, just like its other strategies.
“We built them very similar to how we built our other protected ETF products,” he said.
There are also ways to insulate regulated-fund investors from some of the volatility and risk of crypto investments, as Calamos did by working with the CBOE to design index-tracking Bitcoin ETPs and list options on that index.
That allowed the company to deliver “protected Bitcoin exposure, but not have to hold Bitcoin directly,” Kaufman said.
Even before the SEC’s most recent guidance, Calamos approached crypto exposure with the same internal governance playbook used across its product suite.
“We take all of our funds through our fund board,” Kaufman said. “We outline every group or category that would impact or touch the ETF, accounting, tax, capital markets, trading, liquidity, sales, marketing, and we give the board an overview of whether it’s a low, medium, or high level of activity.”
“The SEC wants these products to be accessible, but they still want safety,” he said.
