Today Bloomberg reported that the SEC is poised to allow the first Bitcoin exchange traded fund (ETF) in the United States. While the SEC has previously approved cryptocurrency-related ETFs, it has only been for ETFs that invest in stocks where the SEC can have more confidence about an absence of price manipulation. The launch of a U.S. ETF has been heavily anticipated as a signal of cryptocurrencies becoming mainstream.
Back in August, when SEC Chair Gary Gensler spoke at the Aspen Security Forum, he dropped heavy hints about a willingness to consider ETFs that are based on futures.
We wrote that he “expects to see filings for ETFs invested in CME Bitcoin futures. Most ETFs have been rejected because there are concerns over price transparency and manipulation. Reading between the lines, the SEC is more likely to give the green light if an ETF is based on a regulated derivative.”
According to Bloomberg, the two ETFs that will go first are from ProShares and Invesco. Since Gensler’s comments, others that have filed for futures-related ETF prospectuses include VanEck, Valkyrie Digital Assets and Galaxy Digital.
More than two and a half years ago, in a discussion that also included ETFs, then CFTC Commissioner Brian Quintenz outlined how the structuring of CME-listed futures mitigates manipulation risks.
Meanwhile, the Wall Street Journal reported that these ETFs could significantly lag the performance of the cash market in part because of the costs of rolling contracts forward. In contrast, several cryptocurrency exchanges offer perpetual futures.
Separately, Grayscale runs the largest Bitcoin Trust, which trades at a discount of more than 16% to the cash price and has been in negative territory since late February.
In Canada, there are multiple Bitcoin ETFs and likewise, in Europe, several exchange traded notes (ETNs). Canada’s Purpose was the first to launch an ETF that currently has CAD $1.5 billion ($1.25bn) in assets under management (AUM) and Canadian CI Galaxy Bitcoin ETF has CAD 466 million ($378m) in AUM.
Several ETNs are available in Europe from Van Eck, WisdomTree, CoinShares, 21Shares, ETHetc and others, mainly focused on Bitcoin and Ethereum. For example, WisdomTree launched its Bitcoin ETN in 2019. The largest is the ETHetc Bitcoin ETF listed on the Deutsche Boerse XETRA exchange and has a market capitalization of EUR 979 million ($1.1 billion).
