13 applications for a bitcoin ETF are in limbo as the SEC deliberates. Some fund managers see a double standard around how the regulator treats crypto.

• Some fund managers and crypto executives question the SEC's approach to crypto ETFs.
• Proponents say common concerns about crypto, like volatility and potential market manipulation, could be said of other asset classes.
• Not all fund managers fault the SEC for taking its time.

If you invest in crypto, "ask questions and demand clear answers." That advice, from former SEC Chair Jay Clayton, is now being put to practice as his successor, Gary Gensler, grills the industry over pending approval of a bitcoin ETF.

Yet as the seven-year quest to get the regulatory go-ahead drags on, some fund managers and crypto executives who spoke with Insider question whether Gensler's SEC has taken too hawkish an approach.

These bitcoin ETF proponents say common concerns about crypto, like volatility and potential market manipulation, could be said of other asset classes, too. They note that Canada, Europe, and Brazil all have functioning bitcoin funds in circulation. And they argue that repeatedly putting off approval carries its own set of risks.

Anxieties that the bitcoin market may be rife with fraud and manipulation are "a bit of a red herring," said Will Rhind, CEO of GraniteShares, which filed for a bitcoin futures ETF in 2017.

"There are many markets that are open to manipulation, but that doesn't stop them from existing or people from launching products in them," he said, pointing to existing ETFs for penny stocks and oil, long swayed by petrostate cartel OPEC.

Ryan Louvar, general counsel at WisdomTree, which manages several European bitcoin ETFs and has applied for one in America, shares the sentiment. The regulatory standard applied to bitcoin funds has been "very, very high - maybe even novel," he said.

In WisdomTree's view - one echoed across much of the industry - the SEC's slow roll on greenlighting a bitcoin ETF is far from risk-free. As the agency delays, demand for bitcoin and other crypto products is not letting up. The result is that the crypto-curious are left with more dubious avenues for investing their money. On balance, such risks to retail investors ought to outweigh the SEC's manipulation concerns, Louvar said.

It is a view that the SEC is, at a minimum, curious about. In a call for industry comment last month, the commission asked precisely this question: how should the investor protections brought by regulated bitcoin ETFs weigh against fears of manipulation?

Across the Atlantic, that question has been asked and answered, said Jason Guthrie, WisdomTree's Europe head. Under the EU's "passporting" regime - which lets financial-services firms seek regulatory approval in 30 European nations simultaneously - crypto ETFs have multiplied across the continent. Sweden was the first domino to fall, starting in 2015, prompting EU-wide approval. The last major holdout is the UK, tied down by messy Brexit negotiations.

But while Europe's ETF experience may make the SEC look like a laggard, the broader reality is more subtle, said Guthrie. American regulators have moved proactively to regulate crypto-custodial companies such as Coinbase Custody and Fidelity Digital Assets. For evidence, look no further than the fact that many European-listed crypto ETFs, like those of WisdomTree and ETC Group, use custodians based in America.

Regulators across the world are "looking at different things and at different paces," said Guthrie.

Nor do all fund managers fault the SEC for taking its time. Some think approving a bitcoin ETF opens the floodgates to all manner of newfangled crypto products.

"It's not just about bitcoin," noted Greg King, CEO of Osprey Funds, which runs an off-exchange bitcoin fund. SEC staffers "have to be thinking in the back of their head - how is this going to set a precedent for anything else?"

Leah Wald, CEO of Valkyrie, another bitcoin ETF hopeful, added the SEC is being "deliberate" in combing through an industry that has rapidly matured. She said that she wished the process was faster but that the agency's concerns were fundamentally valid.

SEC approval may ultimately rest on the industry developing surveillance methods that give regulators a handle on when and where markets are being manipulated, said Chen Arad, COO of Solidus Labs, a monitoring firm that works with regulators.

"Once you open the door, it's harder to go back. The best thing the industry can do is work on providing assurances through data-sharing agreements and shared surveillance," he said.

The SEC didn't respond to a request for comment.