SEC Extends Bitcoin ETF Deadlines Again, but Analysts Are Optimistic

SEC might just favor Bitcoin futures ETF over physically-backed ones with a high likelihood of approval.

By
Chung Yee
on
October 5, 2021
Category:
Blockchain News

Futures Bitcoin ETF 

United States Securities and Exchange Commission (SEC) again extends the deadline to decide on the fate of the Bitcoin Exchange Traded Fund (ETF) applications on its desk. 

However, a senior analyst with Bloomberg remains optimistic that the SEC will approve the US's first ETF filed under a 1940 law. Eric Balcunas, the senior ETF analyst for Bloomberg, in a tweet from October 2, said:

Yes, the SEC has kicked can [sic] on bitcoin ETF approval BUT that is for the physically-backed ones under '33 Act. The futures ETFs filed under the '40 Act (which Genz loves) are very much alive and likely on schedule (we think 75% chance approved in Oct).

In an official statement issued by the SEC on September 29, the regulator again postponed Valkyrie XBTO Bitcoin Futures Fund’s application for a Bitcoin ETF and designated December 8 for its new deadline. 

Source: The 1940 law governing mutual funds is seen as a stricter legal framework that will offer better investor protection 

Three other ETFs suffered the same fate. Global X Bitcoin Trust, WisdomTree Bitcoin Trust, and Kyptoin Bitcoin ETF are each slated for a decision on November 21, December 11, and December 24 respectively. 

The entire exercise has been frustrating for the applicants and the entire crypto community as many believe that cryptocurrency ETF will provide the much-needed boost to launch the crypto market to a new height.   

The fate of the first Bitcoin ETF application will be decided on October 18, filed by ProShares Bitcoin Strategy ETF. This should be followed by the decision on four other applications within a short period of 2 weeks. Balcunas gave a 2-1 probability that the US will likely see its first Bitcoin ETF on October 18 in his tweet on October 1st. 

Different Route Same Destination 

The optimism on the SEC’s approval is not unfounded. Authorities are turning more bullish toward crypto, ever so slowly.

The SEC may not prefer the normal ETF route for Bitcoin which falls under the 1933 Act but the market interest has not diminished. There is a pent-up demand for crypto exposure through an ETF and an ETF approval would be positive news for the crypto market. 

A Bitcoin ETF and a Bitcoin Futures ETF differ significantly. The former is backed by real bitcoin while the latter is backed by derivatives of Bitcoin (futures contract). There may be divergence in the futures price compared to the spot price depending on market sentiment. 

Source

Bitcoin futures are traded on the Chicago Mercantile Exchange (CME) and under the 1940 Act, the funds would come to the market under prescribed conditions making it safer for investors. The SEC Chairman recently indicated he sees a pathway via the 1940 Act when he spoke last week for the Financial Times.

If regulators are concerned that the average investors are at risk when they participate in the crypto market on their own, an ETF is the solution. Clearly defined rules and a comprehensive regulatory framework will make investing more ‘friendly’ to the unacquainted. 

Tags:
Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

Text Link

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.