The SEC’s decision to delay the approval of an ETF for Bitcoin has been met with a lot of backlash, but what exactly is going on? How did this take so long and why now?
The “bitcoin etf approved” is a question that many people have been asking. The SEC took 8 years to approve a Bitcoin ETF in the US.
The US Securities and Exchange Commission’s (SEC) secret acceptance of a Bitcoin (BTC) exchange-traded fund (ETF) last week evoked a wave of enthusiasm in the crypto industry and propelled the primary digital currency’s price to a new all-time high.
Despite some analysts and industry participants having reservations about the approved products’ nature — ProShares Bitcoin Strategy ETF (BITO) and Valkyrie Bitcoin Strategy ETF (BTF) are futures-based rather than tracking Bitcoin’s spot price — the move has been widely hailed as a watershed moment in crypto history.
It was uncertain how much interest the new BITO offers would generate before to their historic debuts on the New York Stock Exchange. Trading volume on the first day of BITO surpassed even the most optimistic forecasts, with the new ETF setting a new high. During the first day, the price of BTF has declined marginally.
As enthralled as the cryptocurrency community is, the question remains: Why is this happening now?
Years of regulatory skepticism
The acceptance of the ETF marks a turning point for the industry. “This moment has been long-awaited,” Bitcoin Foundation chairman Brock Pierce said in a written statement to Cointelegraph. “Numerous entrepreneurs and businesses have sought clearance from authorities as as early as 2013.”
Since the Winklevoss brothers first tried to get regulatory permission for a Bitcoin exchange-traded fund eight years ago, the SEC has a history of rejecting or delaying various proposed Bitcoin ETFs.
The Securities and Exchange Commission has long claimed that the market underpinning these proposed products is a minefield for unwary traders. Possible Bitcoin price manipulation, inadequate liquidity, cybersecurity concerns, and a lack of transparency in trade data required to price the commodity were among the regulator’s main worries.
SEC Chair Gary Gensler originally signaled in early April that he would be receptive to an ETF that tracks the price of regulated Bitcoin futures rather than the real commodity, generating a fresh wave of proposal submissions. Exposure to BTC futures, particularly those regulated under the Investment Company Act of 1940, offers a double casing of investor protection, according to Gensler, which may be acceptable under the agency’s requirements.
Speaking at the Future of Asset Management conference in late September, Gensler reaffirmed his belief in the possibility of a Bitcoin futures exchange-traded instrument, implying that his prior remarks were more than a whimsical use of phrase.
@ValkyrieFunds, congratulations on the launch of your Bitcoin Strategy #ETF $BTF!
https://t.co/mDrWbHn0xI pic.twitter.com/rE5QibNWiB Learn more about the U.S.-listed Bitcoin futures ETF and how it invests in a new future: https://t.co/mDrWbHn0xI
October 22, 2021 — Nasdaq (@Nasdaq)
Indeed, the futures-based concept answers many of the SEC’s investor protection concerns about real Bitcoin products. Because investors are effectively betting on whether the price of Bitcoin will rise or fall, they do not need to touch the cryptocurrency, and the ETF provider is not need to hold Bitcoin, removing a key source of regulatory hassle.
Furthermore, since 2017, the Chicago Mercantile Exchange has provided Bitcoin futures, which are regulated by the Commodity Futures Trading Commission (CFTC). This is a well-established instrument that is well-understood by financial authorities.
Why now?
Gary Gensler, whose nomination as the top securities regulator in April 2021 had many in the crypto industry excited, has immediately shown to have a more difficult relationship with the digital asset market. Many in the industry have written him off as a crypto ally because of his unrelenting quest to classify most crypto assets as securities and regulate them as such.
At the same time, as someone who obviously understands bitcoin and its potential, the SEC Chairman is unlikely to want to be seen as the crypto industry’s number one enemy. Allowing a futures-based Bitcoin ETF to become a reality may be the safest and clearest approach to offer the industry something that looks and feels like a significant win.
Related: Crypto overcomes the ETF barrier on Wall Street: A watershed event or a stopgap?
The creator and CEO of decentralized financial platform EQIFI, Brad Yasar, anticipates two crucial logical points that lead to the SEC’s blockade on Bitcoin ETFs being removed in October 2021. The first is institutional inertia, in which the regulatory machinery takes a long time to react to a need for a new product class, even though it is clear that the moment has come. According to Yasar, who spoke to Cointelegraph,
“After working through its cycles, the system arrived to a point where approval was conceivable. It also helps that several public businesses now have considerable amounts of Bitcoin on their books and declare those assets quarterly, giving authorities additional data points to consider.”
According to Yasar, the second factor is that the SEC is under a lot of institutional pressure to provide conventional financial institutions easy access to this alternative investment possibility.
The cartel of the Securities and Exchange Commission (SEC)
Some more exotic ideas are circulating among crypto intellectuals who believe the government and Wall Street are united in their opposition to individual investors. According to this reasoning, a futures-based ETF implies greater fees and more institutional intermediaries profiting from the growing interest in cryptocurrency among investors.
The SEC is “just part of the cartel,” according to Ryan Selkis, founder of crypto investing business Messari, in a tweet.
I’m looking forward to JPMorgan manipulating the BTC market in the same manner they did the silver market.
That’s why the SEC favors a futures ETF, which costs 5-10% yearly, over a spot ETF, which costs 1-2%.
At this point, the SEC is just a member of the cartel. pic.twitter.com/vc0VVKHUyE
15 October 2021 — Ryan Selkis (@twobitidiot)
Whatever prompted the ETF’s acceptance by authorities, it will almost certainly be a net gain for crypto adoption and mainstreaming. Investors’ ecstatic response to the new offering in the early days of trade demonstrates that those who predicted it would struggle were mistaken. Large swathes of US investors seem to be interested in the simplicity with which they may obtain exposure to Bitcoin from the comfort of their ordinary brokerage or retirement account.
Perhaps the greatest answer has always been the simple concept that the moment has come and there’s no use in resisting the inevitable.
The “how many bitcoin etf applications are there” is a question that has been asked by many people. The answer to the question is none, because the SEC took eight years to authorize a Bitcoin ETF in the US.
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