SEC Takes More Time on Pudgy Penguins and T. Rowe Crypto ETFs

The SEC also opened a public comment period on options linked to the Grayscale CoinDesk Crypto 5 ETF. At the same time, market flows turned decisively negative, with spot Bitcoin ETFs posting $681 million in net outflows over the first full trading week of the year and Ethereum ETFs seeing smaller redemptions. Analysts attribute the pullback largely to macroeconomic uncertainty, as expectations for near-term interest rate cuts faded and geopolitical risks rose. Despite the near-term slowdown, institutional engagement is still gaining momentum, with Morgan Stanley filing for new Bitcoin and Solana ETFs and Bank of America expanding adviser access to Bitcoin ETFs.

Crypto ETF Momentum Cools

The US Securities and Exchange Commission (SEC) extended decision deadlines on two proposed ETFs while opening a public comment period on options tied to a third product. The moves were disclosed in separate Federal Register filings on Monday.

In two of the filings, the SEC designated a longer review period under the standard 19b-4 process, which allows the agency to extend its initial decision window by up to 45 days. One proposal would permit the listing of the Canary Pudgy Penguins (PENGU) ETF on Cboe BZX, while the other involves the T. Rowe Price Active Crypto ETF on NYSE Arca. 

SEC’s Federal Register filing

These extensions do not suggest approval or rejection, but rather indicate that the commission wants more time to evaluate issues like market structure, investor protection, and the potential for manipulation.

The Canary PENGU ETF is among the most unconventional crypto-linked products currently under consideration. It seeks exposure to the Pudgy Penguins ecosystem, which is a high-profile NFT collection that expanded into licensing, consumer products, and tokenized initiatives. Meanwhile, the T. Rowe Price Active Crypto ETF would be an actively managed fund investing across a basket of digital assets beyond Bitcoin and Ethereum.

Alongside these delays, the SEC also acknowledged a proposed rule change by NYSE American to list standardized options on the Grayscale CoinDesk Crypto 5 ETF. That filing has entered the public comment phase, inviting feedback on whether options trading on the fund would align with Exchange Act requirements for fair and orderly markets and adequate safeguards against fraud and manipulation. The underlying index tracks five large-cap digital assets: Bitcoin, Ethereum, XRP, Solana, and Cardano.

Top 10 cryptos by market cap (Source: CoinCodex)

If approved, options on a multi-asset crypto ETF will be an expansion of crypto-linked derivatives in US markets that offers investors new tools for hedging and leverage beyond the Bitcoin- and Ethereum-focused products that dominate today. For now, the SEC is neither shutting the door on innovation nor rushing approvals, but instead carefully pacing decisions as the crypto ETF space grows.

Crypto ETF Flows Turn Negative

In addition to crypto ETF approval delays, spot crypto ETFs began 2026 under pressure, with investor flows turning sharply negative after a brief burst of early optimism. Data from SoSoValue shows that spot Bitcoin ETFs recorded a combined $681 million in net outflows over the first full trading week of the year. 

This is a decisive reversal from the inflows seen at the very start of January. The pullback unfolded over four consecutive trading days, with the heaviest redemptions concentrated midweek.

Weekly Bitcoin ETF flows (Source: SoSoValue)

The largest single-day outflow occurred on Wednesday, when Bitcoin ETF products shed roughly $486 million. That was followed by an additional $398.9 million in net redemptions on Thursday and $249.9 million on Friday. These losses more than offset the strong start to the year, which saw inflows of about $471 million on Jan. 2 and a further $697.2 million on Jan. 5. 

Spot Ethereum ETFs followed a similar pattern, though on a smaller scale. Over the same week, Ethereum-focused funds posted net outflows of approximately $68.6 million, ending the period with total net assets of around $18.7 billion. 

Weekly Ethereum ETF flows (Source: SoSoValue)

Vincent Liu, chief investment officer at Kronos Research, attributed the downturn primarily to macroeconomic uncertainty. He said changing expectations around interest rate cuts and rising geopolitical risks dampened risk appetite across markets, with crypto caught in the spillover. Investors, according to Liu, are now closely watching upcoming US Consumer Price Index data and guidance from the Federal Reserve for clearer signals on when monetary easing might resume.

Despite the volatility, longer-term institutional engagement with crypto ETFs is still growing. Morgan Stanley filed with the US SEC to launch two spot crypto ETFs, one tracking Bitcoin and another tied to Solana. Separately, Bank of America recently began allowing advisers in its wealth management units to recommend exposure to select Bitcoin ETFs. Even amid short-term outflows, large financial institutions are still laying groundwork for crypto adoption.