Are crypto exchange-traded funds (ETFs) finally coming to the United States of America? Dozens of cryptocurrency-based ETFs or ETF-like products are currently selling on regulated exchanges in Europe, while Canada and Brazil have already introduced their own versions this year. Over the past eight years, however, not a single investment firm has won the U.S. Securities & Exchange Commission’s (SEC’s) approval for a cryptocurrency-backed ETF. The winds may now be shifting.
“A futures-based Bitcoin ETF will be approved in the coming weeks, not months,” John Sarson, co-founder and CEO at Sarson Funds LLC, told Cointelegraph, adding that “the futures market for Bitcoin is now extremely well tested and very liquid at three years of age.”
The outlook wasn’t nearly as promising a month ago, but things gained momentum on Aug. 3rd when SEC chief Gary Gensler signaled in a statement that the U.S. regulatory agency was not necessarily opposed to futures-based Bitcoin (BTC) ETFs.
Gensler said that he was looking forward to his staff’s reviews of recent filings from firms looking to market exchange-traded funds with an indirect exposure to the world’s leading cryptocurrency, “particularly if those [fund offerings] are limited to CME” — i.e, Chicago Mercantile Exchange — “traded Bitcoin futures.”
“Gensler took us all by surprise,” Kathleen Moriarty, senior counsel at Chapman and Cutler LLP, commented to Cointelegraph. The Gensler statement, along with the subsequent withdrawal of Ethereum (ETH) ETF filings by fund administrators VanEck and ProShares, prompted two Bloomberg analysts to opine that a futures-based Bitcoin ETF could be approved as early as October.
Is this reading too much into the agency’s tea leaves? Is a futures-based BTC ETF really imminent, and if so, why can’t an ETF take direct ownership in Bitcoin? Gensler, who once headed the CFTC which regulates U.S. derivatives markets — including futures — may believe that a futures-based crypto ETF offers another layer of investor protection, i.e., CFTC oversight on top of SEC supervision.
Consider, too, that a futures-based BTC mutual fund, Bitcoin Strategy ProFund (BTCFX), won SEC approval in July without a lot of fanfare. Maybe the SEC is using futures-based crypto funds as a transition product to test the regulatory waters with physical-based crypto ETFs to follow in 2022, say, if all goes well. Then again, is a futures-based Bitcoin ETF really the best product for investors?
Are Bitcoin ETFs close at hand?
Chris Kuiper, vice president at CFRA Research, told Cointelegraph: “We only think it is a matter of time. Given that the SEC allows gold ETFs based on futures, it would be hard for them to not eventually approve a Bitcoin ETF also based on the now well-established Bitcoin futures market.”
How the Bloomberg analysts Eric Balchunas and James Seyffart could interpret the VanEck and ProShares’ withdrawal of proposals for Ethereum ETFs as a good sign for crypto ETFs may be baffling at first glance, but as CEO of Banz Capital John Iadeluca explained to Cointelegraph: “While VanEck and ProShares’ quickly withdrew their Ethereum futures ETF applications, they didn’t do the same with their Bitcoin futures ETF applications, which seems to be a positive sign for approval of a Bitcoin ETF.” When those funds providers saw one door crack open, there was no need to surveil all doors, presumably.
Iadeluca further noted that when the Chicago Mercantile Exchange took its first steps into cryptocurrency futures, it began with Bitcoin futures, and Ethereum futures following several years later. “It would make sense for the same order to occur with futures ETFs, and the recent ETF application activity seems to hint at that happening sooner than expected,” Moriarty added:
“The other curious thing that no one has mentioned is that on May 11, 2021, the [SEC’s] Division of Investment Management issued a statement regarding its current views…
Read More: cointelegraph.com