- If allowed by the United States’ Securities and Exchange Commission (SEC), the first Bitcoin futures index funds could begin trading on Wall Street as early as next week.
- The US regulator is not expected to block ETFs from ProShares or Invesco, sources familiar with the matter revealed.
- BTC has continued to climb as of late, surpassing $60,000 on Friday 15th, helped in no small part by the positive expectations around ETFs.
Starting as early as Tuesday 19th the first Bitcoin futures ETF could start trading on the New York Stock Exchange. The only potential obstacle would be the Securities and Exchange Commission (SEC) objecting to the filing, but it appears that this will not happen.
The deadline for the SEC to issue a verdict on ProShares’ Bitcoin Strategy and the Invesco ETF IPO is at midnight on Monday, 18th. A source familiar with the matter revealed to CNBC that the US regulator would not oppose it.
These ETFs, a hybrid between a mutual fund and a stock, are based on futures contracts and were presented following the guidelines of mutual funds, which, in the opinion of the president of the SEC, Gary Gensler, offer great protection to investors.
Gensler, who was a professor of cryptocurrencies at MIT and a harsh critic of digital assets, is a proponent of increasing regulations on blockchain-related products, although recently he has relaxed his lacerating verbage against cryptocurrencies and has become more condescending.
ETFs Power Bitcoin
The fund slated to be launched next week is the result of a year’s worth of efforts by the ETF sector, which manages assets worth approximately $7 trillion and has long been trying to convince the SEC to approve such a product linked to Bitcoin.
The source familiar with the ongoing discussions within the SEC explained that Gensler will not block the ETF’s IPO. This information is also being handled by Bloomberg News. Although a spokesman for the Wall Street regulator did not comment on the matter, neither did ProShares or Invesco officials.
On Friday the world’s most popular cryptocurrency was trading at above $60,000, a high it hadn’t seen since April 17th, boosted in part by the news that the SEC will allow ETFs.
So far in October, BTC has risen in the market by around 40% and is already close to reaching its all-time record price of $64,800 that it achieved in mid-April.
Both ProShares and Invesco will offer their clients indirect forms of Bitcoin investment. ETFs, which are based on bitcoin futures, are already listed on the Chicago Mercantile Exchange.
The SEC’s Concerns
There are other funds that plan to present a pure gambling ETF backed by physical bitcoins, But a decision on these investment products is not expected to be made any time soon.
In recent years, the SEC has argued that the volatility and fraud surrounding the crypto industry have made ETFs, like other similar types of funds, too risky to approve.
On the other hand, Gensler fears that bad players in the industry will put undue pressure on cryptocurrency prices, or cause artificial limitations on the liquidity of certain assets.
"Currently, we just don’t have enough investor protection in crypto finance, issuance, trading, or lending,"
Gensler said in a September appearance before the Senate Banking Committee.
After comparing what is currently happening to the American Wild West, the official called for legislation to supervise the cryptocurrency market, regulate digital money, and offer greater protection to investors.
On The Flipside
- For some investors, the bitcoin futures ETF is a disappointing product.
- They consider these direct funds to be avoiding the high cost of converting them into futures contracts, which do not adequately monitor the spot price of BTC.
- Consequently, they prefer a pure ETF that is backed by physical BTCs.
Despite the SEC’s forecast of approval for ETFs, some analysts believe surprises could still occur. ETF Trends research director, Dave Nadig gives the funds involved “a 75% chance of approval.”
"A futures is a derivative of the spot market, so if you are comfortable with futures, why wouldn’t you be comfortable with the spot market?"
said Michael Sonnenshein, CEO of Grayscale Investments.
The cryptocurrency asset manager has announced its plans to convert GBTC into a bitcoin ETF if the ETFs are approved by regulatory bodies.
Why You Should Care?
- Either way, the approval of ETFs based on futures contracts represents a breakthrough for Bitcoin fans.
- It is also a breakthrough for the entire ETF community, as it provides a new avenue for the crypto market to reach new spaces.