ETF Edge - Trump Admin’s new impacts on ETFs 7/28/25

Episode Date: July 28, 2025

From cryptocurrencies to competition with mutual funds… recent and upcoming policy out of Washington is changing the landscape for big portions of the ETF industry.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by Invesco QQQ, proud provider of access to innovation for the last 25 years. Invesco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things, exchange traded funds, you're in the right place. Every week we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors and their money. I'm your host, Dominic Chu. Recent policy changes out of Washington, D.C. have changed the framework for the E. EETF industry and everything from cryptocurrencies to your 401k.

Here's my conversation with Sal Gilberty, president and CEO of Tukrium Trading, along with Eric Pan, the president and CEO of the Investment Company Institute, or ICI. That's the largest fund advocacy group. I'd like to start with you, Sal, on the notion of cryptocurrencies. If we talk about the status of what we're, you know, kind of looking at these days, we know that the fund business has now gotten much more into the ability for investors to park their money in cryptocurrencies, but in ETF format. You run one specific product tied to a specific cryptocurrency and that's XRP. Maybe take us through just what was the impetus behind

launching an XRP based ETF for a guy who's basically run commodity-related funds for years now. Well, we naturally do derivatives-based products. And so we have commodities-based funds. And then when the derivatives came in, for crypto, we filed immediately for a Bitcoin fund. And for a variety of reasons, including some regulatory changes that happened, we filed under 33 Act and 40 Act came in in the midst of that filing. And 33 Act takes much longer. It takes 270 days versus 75 days. And that really, we missed because of that.

We missed our opportunity to be first in crypto derivatives space. And so I'm familiar with XRP. I'm a fan of XRP, and that was natural for us. You still can't own XRP in an ETF, the coined itself, the token itself. But XRP derivatives came out. And slightly before they came out, we figured out a way to package them, put them into a double exposure, which I think is what people wanted.

You've got a lot of traders, a lot of very aggressive people that want to do that. And so we put it into XXRP, which is double exposure for XRP. Okay, so what exactly are the maybe investors or traders, I guess in this way, because for traders, they're the ones often looking for some of these

inverse or levered type products. When you target an audience for the ETF market like you have, what exactly do you see as the profile for the people who traffic more intensely in a double XRP ETF? Well, it's interesting because as an ETF issue where we don't actually see who buys our things directly. We have to design a product that we think there's demand for. And we very much suspected and new, I will say, that there was demand for XRP and demand for tradable XRP product where people could get aggressive. And this is an aggressive product, obviously, it's levered. It's not designed to be bought and held at all. It's designed to be traded each day. And people love it.

People, people love it. A lot of interest has been in it. It has very high trading volume and good flows have come in in the last four months. All right, Eric, this is an interesting development here with regard to just how the ETF business has evolved specifically in the last maybe 10 years, and even more so with ETFs that track cryptocurrencies. From an advocacy group standpoint, Your firm is one of the ones who advocates on behalf of many fund managers out there, lobbies on their behalf. What exactly have you seen with regard to the adoption rate of crypto-related fund products compared to other seemingly hot trends that have kind of been capitalized on in the ETF industry

over the last couple of decades? Well, it's definitely growing very quickly. First, we've got to keep it in mind that ETS in general, not only crypto ETS, record inflows. Already this year, $600 billion in net inflows into ETS, which is the highest it's ever been. So we're approaching record levels. So when you take crypto ETS as a portion of that, from our perspective, demand is really strong, investors are interested, firms like Sal's are innovating quickly, and we have a new regulatory environment here in Washington that is really encouraging this type of innovation.

Eric, if I could follow up on that, it's also a regime, if you will, these days, regulatory and fund management and otherwise. That seems to be warming more to the idea of having crypto-related ETF-type products. Just how much are perhaps asset managers, ETF fund managers, really on board with the idea of crypto, or is it just a situation where you kind of put the product out there because there's such latent demand for it? Is it because that these fund managers really do believe in the product, or do you think it tilts more to the idea that it's, you know, give the people what they want, so to speak? I think it's demand-driven. Look, investment managers are there to serve the investors. And to the extent that investors are interested and curious in crypto products and other types of asset classes, there's going to be a response to meet that demand. You know, a lot of our investment is still based upon fiduciaries and investment advisors. And I think that's really a personal conversation between individual investors and their advisors

as to whether or not crypto is appropriate. But what we have seen is people are interested in crypto and the industry has responded to that interest. Sal, your product, you mentioned it is a levered product. So it seeks to gain two times the return of XRP. on a daily basis, not necessarily for a prolonged period of time. We've told many stories, pitfall-type stories about some traders or investors who use these products, thinking that they're double-x over a two-month, three-month, year-to-date, one-year-type period, and then getting burned. If you look at the way that many of the allocators have been treating some of these

cryptocurrency-type funds, they have been treating them as allocation instruments because some people just want to say own a piece of it. It's different than the profile that you kind of attach your product to as well. How do you, I guess, differentiate or how would you tell the audience about how to use funds like yours versus ones who are straight up tracking, say, the price overall of a particular cryptocurrency? Sure. I think allocators of people who want a steady exposure in their portfolio to crypto should do an unleavered fund. They should buy a fund that just holds the token and goes up and down with the token very, very smoothly in terms of no leverage whatsoever as little static as possible. There's always fees and expenses and some slippage

and static around execution, but in all funds. But on a double levered fund, those leverages are reset daily, that it is really meant to be held for one day and one day only. People need to understand that. We tell them it's written in the prospectus. You have to really beat the drum to let people know if you just want exposure to a token by an unlevered fund if you want to trade a token for price movement then an unlevered fund could be an option for you you have to really know what your own anytime there are derivative instruments that underlie a particular ETFs products you have to kind of treat them a little bit differently as a person who's run sell commodity based ETFs and still does run commodity based ETFs on agricultural products and things like that

like that, just how different is running a crypto-related fund versus, say, a more traditional, I hate to use that term, but a traditional fund that tracks the movements of, say, an underlying product or futures product. But in principle, they should be the same. In practice, because crypto is so new and the derivatives for crypto is so new, there's a lot more work involved on a literally an hourly basis because you're finding liquidity, you're finding new players, you're testing the markets, you're testing the waters with these new derivative products that are out there. They're listed on exchange. They are well regulated. They're good

products. That's why we use them. But the whole marketplace is getting used to it. So when you have a surprise success, like the double XRP fund, XXRP, that causes you to scramble a lot more finding trading partners, finding that liquidity, which we do. But it's a lot easier on established market like grains, you know, our corn fund. The future has been around for 100 and something years on grains, it's a lot easier than a crypto future has been around for weeks or months or maybe a year. Eric, Sal makes a great point with regard to just how the product and its evolution has come. Technology has played a very big role in the speed at which people can adopt and roll out different types of products. I wonder from an ICI perspective for a group that is now representing

many of the biggest asset managers out there and fund providers, maybe take us through some of the behind the scenes, if you will, for what the kind of. conversations are like from a regulatory legal framework standpoint for advocating on behalf of fund managers and sponsors who want to put out crypto-related ETF products versus the ones who dabble in more traditional products like stocks, bonds, or even commodities, how different is the conversation that you're having with regulators and lawmakers about just what it takes to roll out a crypto product at scale? So it's actually very similar. The conversation really isn't that different. And the basics are to say, which is we want there to be regulatory certainty.

You know, we're a regulated industry. Any time the regulators are not providing certainty, it becomes legal risk, regulatory risk. We've got to mitigate that. And then the other thing is we want pro-innovation. We like the idea that through competition, firms, our members, can come up with new products, try them out, see if there's an interest in them. So that's really what we've been advocating for, both on capital, and with the SEC. And I'm very happy to report that, you know, our views get a lot of traction. We're very optimistic that Chairman Paul Atkins and his commissioners are thinking very thoughtfully about this issue,

and we're engaging with them very closely. It's interesting because it's fair to say that a group like yours does have some influence in crafting out what policy has looked like. Would you maybe handicap for us how you feel the. current regulatory and legal framework regime has differed with regard to this administration and its treatment of the fund management business, especially around crypto, versus what you've seen in the past? And by extension, what exactly is the path forward in terms of trajectory look like when it comes to the adoption and rollout of more kind of, I wouldn't say frontier type products, but more forward-looking type products? Well, I think first is I want to manage expectations

because we're at the beginning of the journey in our conversations with the regulators about crypto. The CFTC does not yet have a permanent chairman. You know, Paul Atkins has only been in office now for a few months. So we're at the beginning of the journey. But what I can say is they're very interested in hearing the views of groups like mine at the ICI. They want to talk to member firms. They want to understand what they're seeing in the marketplace. And this to me is a really positive step.

I think at the prior SEC, there was a greater hesitation in terms of engaging with the industry. So again, conversations, a lot of data collection right now, a lot of trying to understand what's in the marketplace. But we're very much at the beginning of concrete proposals. And, Sal, if I could turn to you from a person who has to operate within this regulatory framework, how easy is it, so to speak, for you to get an idea for a product and roll it out and create a fund for it? Do you feel as though this is an environment that can kind of breed innovation within ETFs? Or do you feel as though there are still things that ETF providers and the investors that deal with them have to understand more of before maybe these kind of newer type products are unveiled? I think it's always the case that people need to understand more.

but I think the regulatory environment in Washington has changed in that our job is the same and the steps that we take to list the fund are the same but there's no animosity anymore. Now they look at what you submitted, they look at it with reasonable eyes, we're not feeling like they're antagonistic, that they're looking for a problem, that they're looking to actually go against whatever it is you're trying to do. It's a completely different environment in Washington right now. It's more friendly, it's more welcoming towards innovation, especially in crypto. And that's a welcome sign and that's a relief for us.

From a provider standpoint, Sal, though, you do appreciate the idea that they're, you use the word adversarial antagonistic. There's probably a reason that some of the prior administrations did treat them with a bit of more of a skeptical eye. And that was to try to protect investors or traders that deal in these products. Do you feel as though the investing community has become savvy enough on a general consensus base? than they were, say, 10 or 20 years ago, do you feel as though people understand the fund management business better, the products they put out,

and then don't need as much hand-holding as they have in the past? I think we're getting there. I think that people are becoming more savvy. I think savvy enough. I'm not sure anybody will ever be savvy enough. You've got to keep learning, got to keep on track. It's really important, especially the creativity

of the products that are coming out. People need to understand what they're owning. The regulators are there. They're doing a great job. The U.S. markets are the safe. markets in the world for a reason because we have tight and very thorough regulations enforced by the regulators and overseen by the regulators. But there's a different environment now and that it's friendly. And that helps a lot. But I think investors always need to be learning.

They're never sophisticated enough, in my opinion. All right. Of course, I want to tilt the conversation to one other thing that's a huge focus, especially today, given the fact that the U.S. has now inked a very large, overarching trade deal with the European Union. of course very much in focus this week with all the new deals being struck over the weekend. I wonder, Eric, if you might be able to shut a little light for us on just where you see some of the action developing within the mutual fund and ETF business specifically. We know there are themes tied to tariffs and trade policy. We talk about certain industries and sectors like pharmaceuticals, semiconductors, the auto business.

We talk about geographies, emerging markets, developed markets, all of these. types of instruments are out there. What exactly has come to light in your mind with regard to just how much more activity there is in thematic ETFs tied to trade policy as opposed to other investment trends that we've seen in the past? So there's a lot of optimism in the markets. I think again going back to the certainty point, before we had trade deals, it was the question of what would be the hit caused by the tariffs. Now we have deals with the European Union, with Japan, conversations with China going on. I think people are very, very comfortable with the fact that whatever is the new normal,

15% or whatever the level is, the markets can now actually do long-term investing. And I think that's really positive. The fact that we have record highs is an indication that the market is responding well. And I'll also want to say, because we focus a lot on the retail investors. There's still a lot of money that's sitting on the sidelines. If we look at money market funds, trillion dollars half of that's retail money so they're sitting on a lot of dry powder right now that could go into the market now if it does go into the market i know that you're not an investment advisor i'm not i'm not asking to make a prediction here on this eric but from somebody who can have has a bird's eye view right a very big kind of macro look at the the fund management

market overall where are you seeing some of the most activity build up with regard to how things might shape up for the second half of this year? So I think I'm going to focus on the types of product because this is ETF Edge. We definitely want to highlight strong interest in active ETS. That's one of the faster-growing segments of our industry. And I think you see people want to take advantage of the benefits that ETS provide, but also the active strategies that are new to ETS.

A lot of interest in that. And the fact that there is this interest is because of these market developments, people see opportunities. All right. So active is a thing that we've heard many of our guests talk about before. It's just the growth relative to what we've seen in traditional passive index-related investments. Sal, I'll turn to you for one final question before I kind of closing is out with Eric as well. From your perspective, what exactly is the thing or things that you are most looking towards to help you determine what the sense? second half of the year looks like. You see commodities very clearly. You see what's going on with

XRP. But I wonder what exactly would, from your management standpoint, be the things to watch out for, to give us an idea of what this second half can look like. Well, I think people need to make sure that liquidity stays stable and it is. I think there's plenty of money. And as Eric said, a lot of money on the sidelines still. I think in terms of tariffs, we're getting some clarity. But in our business, especially with agriculture, what does the U.S. import? We import sugar. And so tariffs on sugar is a big deal for some, for our sugar fund. And what do we export for reciprocal tariffs? And that's very important because we've seen this before under Trump,

where soybeans go down because China uses the U.S. as its last source. And so soybeans in the U.S. will go down temporarily. But there aren't enough soybeans in the whole world. So eventually China will run out of buying them from other people, primarily Brazil, and they'll have to buy again in the U.S. So I think people can look at as these things play out. The grains like corn and soybeans that we export, they may see a little bit more depressed prices than you might ordinarily see during harvest time in October.

And then you may see a rebound as people come in and buy. And if sugar, if there's continued demand for sugar, and we are tariffing sugar, the sugar imports that are coming in, the U.S. does not produce enough of its own sugar. It must import. So there's going to be some effects there. And of course, there's going to be ripple effects there with regard to the inflationary picture as well, given some of the aspects of the input costs fluctuating either up or down on that as well. There could be products specifically, but tariffs aren't really inflationary because they're

taxed. So products specifically, there could be some price rise. All right. And Eric, I'll turn to you for our final question. With regard to the second half of the year, what exactly has got your interest piqued? What are you looking out the most for? So I think being based here in Washington, very interested in whether or not the SEC allows ETS share classes to be introduced into the mutual fund product. Also, private assets. Big topic here. Should private markets be allowed in our retirement system? The use of ETFs to actually get exposure into private asset vehicles. That's an entire conversation that we need to have.

Now it's time to round out the conversation with some thoughtful analysis and perspective to help you better understand ETFs with our Markets 102 portion of the podcast. Eric Pan, the CEO of the Investment Company Institute, continues with us now. Eric, it was a fascinating conversation, but I want to pick up where that show left off in a comment that you made at the end talking about how you're looking for the advent or anticipated release of share class ETFs. There's been a lot of mentions of this on this show, and there have also been a lot of questions about clarification.

I just spoke to Sal Gilberti, who himself says he wants to listen to this podcast because he wants to know what exactly it means. So can you take us through what exactly is a share class for ETFs and why you think it could be so game-changing? Sure. So when we talk about an ETF share class, we're referring to every standard mutual fund can be divided up into classes. and if one of the classes can be an ETF, then it allows an investor in a mutual fund to get all of the advantages of a mutual fund while also gaining the advantages offered by ETFs, including the lower costs, but also the tax advantages offered by ETS. Now, this is something which, you know, historically, ever since the ETF became popular, if you wanted to take your money and move it from a mutual fund to an ETF,

you had to exit the mutual fund and put your money into an ETF. So mutual funds basically kept on facing withdrawals while ETFs grew. Now if you can get an ETF share class into a mutual fund, then your money doesn't have to leave the mutual fund. It actually stays in the mutual fund. And for mutual fund providers, this is quite attractive, because they don't have to worry about withdrawals anymore. Okay, so again, to clarify what this means, in the traditional mutual fund, you know, construct, or paradigm,

you had like A, B, C, D, E, F, share classes, different ones that had either different fees attached to them, different minimums, investment minimums, sometimes different sales loads, front or rear on, you know, on some of these investments. But you're saying that all of that can stay the same. What you're just adding is another share class for a traditional mutual fund. So rather than just having an ABCD share, you can also have an ETF product that is part of that same fund family, right? Exactly. Exactly.

And the thing is, mutual funds can't just create share classes willy-nilly. You know, if they want to add an ETF share class, they will need SEC. approval to do so. There's an application they have to file. So for years, this idea has been on the drawing board, but since the SEC has never given approval, mutual fund companies have been stuck. Okay, if they have been stuck now, what does this mean in terms of how could change the paradigm for the mutual fund business, which, to your point, has been fighting this kind of war of attrition and losing it, withdrawals coming out of certain types of mutual fund products and going to ETF type equivalence. What does this mean? And how quickly do you expect

some kind of a resolution to this introduction of possible share classes for mutual funds? So in late 2024 after the election, the SEC under acting chairman, Mark Ueda, indicated that it was actually going to be open to approving these applications. So this was significant because for the first time the SEC was saying, hey, we actually are willing to let you do this. And that has triggered then a lot of work because a lot of fund companies see this as an opportunity. The opportunity being to be able to get investors to stay in the mutual fund

and still get some of the benefits that they would get if they were to move to an ETF. So this is really something that will make the mutual fund product more attractive, which is something that the mutual fund providers like very much. Now, the SEC has not yet given formal approval. It's been in conversations with the fund companies, but we actually think it's possible that later this year, this calendar year, there will be approval, which means ETF share classes will become available on the marketplace, you know, in 2026 and down the road. And Eric, before we let you go, as we conclude this portion for our podcast, just how much interest is there from asset managers who manage mutual fund type products for introducing this new ETF share class,

into their existing mutual fund families? So there's a lot of interest. There are over 50 fund companies that have filed applications to the SEC to do this. What we don't know yet is the level of investor interest because a lot of the details, for example, will there be cost associated with the share class? what would be the investor experience in terms of understanding what the share class offers?

A lot of that has not yet been determined, and it's part of current work. So it's hard to say if this is going to be something that is instantly going to get a lot of attention from investors, or is it going to be something that will take time for investors to start learning about and over time then starting to take advantage of this. All right. It sounds like there's a lot yet to unpack right now. Eric Pan at the ICI, the Investment Company Institute. Thank you so much for joining us here on the ETF Edge podcast.

Please come back when you have more developments. We'd love to hear about what you're seeing. Well, thank you for having me. All right. That does it for ETF Edge, the podcast. Thanks very much for listening. Join us again next week. And as always, you can just head to ETFedge.c.c.com.

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