Companies in the US have been trying for years to get an exchange-traded fund (ETF) approved by the US Securities and Exchange Commission (SEC). However, they did not succeed.
An ETF is a security that tracks an asset. However, people can buy or sell it on the stock exchange just like any other stock.
They can track anything. In the case of cryptocurrency, ETFs usually track a coin such as Bitcoin (BTC) or Ethereum (ETH), or a combination of coins.
The reason ETFs are important is because they are considered a way for major investors to enter the cryptocurrency market. ETFs delegate some of the responsibility for managing cryptocurrency investments to experts.
It may be more accessible to new investors who are not very well versed in the world of cryptocurrencies but see their value.
Several countries give Bitcoin ETF the green light
Crypto ETFs are a fairly new offering. Canada became the first country to approve it in February 2021.
Purpose Investments' Bitcoin ETF is listed on the Toronto Stock Exchange. In its first week after launch, it earned $ 624 million in nine days.
North America is not the only continent endorsing cryptocurrency ETFs. Brazil was next to approve its first ETF, the QR Capital Bitcoin ETF. It is not yet listed, but should be listed on the São Paulo Stock Exchange in June.
Companies are trying to get ETF approval in the US.
In a sense, the US is the last frontier for ETF approval. As a longtime global financial superpower, the decisions of the US SEC are important not only for the country, but for the rest of the world.
Companies in the US have tried to get SEC approval. VanEck's latest filing with the Securities and Exchange Commission is currently pending.
The Commission took note of the request on 18 March, after which a 45-day countdown began for response. However, it can increase the response time, which will lead to even more waiting.
This is simply the last bitcoin ETF presented. Along with VanEck, Valkyrie, WisdomTree, Fidelity Investments, and Goldman Sachs also filed in 2021.
However, the SEC takes time to review applications, often before quickly rejecting them. Cameron and Tyler Winklevoss papplied for a cryptocurrency ETF in 2013... It took years to review and was eventually turned down in 2017.
These numerous attempts disappointed the participants. VanEck digital asset strategist Gabor Gurbax said in March tweet:
“Now is the time for US regulators to get down to business and approve the bitcoin fund. The Europeans have an ETP. Canadians have ETFs. ETFs bring many benefits to the markets. ”
Even the Grayscale Bitcoin Trust recently confirmed that its interest lies in converting its bitcoin trusts to ETFs once approved. This will be the final stage in the life cycle of cryptocurrency trusts.
The company originally applied for an ETF in 2016 but withdrew it because "the regulatory environment for digital assets has not reached the point where such a product could be successfully brought to market."
Regulator safety concerns
The Commission clearly explained the reasons for these refusals. Many cite lack of local trade volumes and concerns about manipulation.
For example, the SEC relied heavily on the fact that in the filing of the Bitwise Bitcoin ETF in 2019 there was not enough evidencethat could protect against fraud and market manipulation.
Since its job is to protect investors from schemes that can lead to the loss of their money, all these points seem fair.
However, the number of rejections also speaks to the standards that the Securities and Exchange Commission requires of these documents. In a bitwise response, the Commission even refers to Winklevoss' apps and their similarities to Bitwise's arguments.
SEC Commissioner Hester Pierce addressed this possible issue with refusals to interview Forbes.
"I also think we've crawled into a small hole by setting approval standards that are hard to figure out how to meet," Pierce said.
Pierce often opposes these rejections and is the voice of dissent on the commission.
On the other hand, her former boss, former chairman of the Securities and Exchange Commission, Jay Clayton, was in charge of the commission's handling of fraudulent and unregistered initial coin offerings. Many saw his position as a barrier between Bitcoin ETF and approval.
However, Clayton stepped down from his post in December 2020. Companies awaiting ETF filings will need to see how this affects the outcome of their filing.