Even though the greatest year for cryptocurrencies so far is coming to its end, but it doesn’t seem that American investors will get a spot Bitcoin Exchange-traded fund (ETF). The tussle of the US Securities and Exchange Commission (SEC) with this particular investment product continues, as the regulatory authority once more turned down applications for two highly-awaited ETFs. The financial watchdog published orders indicating that the Bitcoin ETFs, physically backed by Bitcoin, proposed by Kryptoin and Valkyrie, had been rejected for the same reasons that had been cited in their previous rejections of similar applications.
In addition, the SEC noted that exchanges Cboe BZX and NYSE Arca, which had filed for proposing rule changes to list and trade Kryptoin and Valkyrie products, respectively, had also been unable to demonstrate that their proposals were in accordance with the requirements outlined in the Exchange Act Section 6(b)(5). The Commission went on to say that this specifically referred to the requirement of the national securities exchange have rules in place for preventing manipulative and fraudulent practices and acts and for protecting the public and investors’ interest. The purpose of an exchange-traded product is to enable investors in getting exposure to the underlying asset without having to go through the hassle of directly holding the asset in question.
This can be particularly helpful in the case of Bitcoin and other digital currencies because they require people to possess some technical milieu to hold them safely, especially in large quantities. ETFs have become quite a rage in Europe and even the neighboring countries of the United States have given their approval, but regulators in the US have maintained their reluctance to introduce a Bitcoin ETF that would be backed by the asset because of concerns about price volatility and market manipulation. However, a number of futures-backed Bitcoin ETFs had gotten the approval of the SEC, which are connected to the derivatives market of the Chicago Mercantile Exchange (CME).
Despite their record-breaking launches, these particular ETFs haven’t impressed investors because they are not considered retail-friendly as rolling over contracts incur a very high cost, which can be around 5 to 10%. Even though enthusiasts have been putting a lot of pressure, it appears highly unlikely that the first spot Bitcoin ETF would be introduced in the United States this year. However, there are a number of other important products that are slated for a decision early next year, which is giving some hope to people.
The SEC is expected to make a decision regarding the Skybridge Bitcoin ETF of Anthony Scaramucci by January 22nd, whereas a decision of the Wise Origin Bitcoin Trust by Fidelity would be made by January 27th. Last week, the financial regulator had also decided to deferr decisions on applications filed by leading digital asset managers Grayscale and Bitwise by 45 days. It rejected Bitcoin-spot-ETFs that had been proposed by WisdomTree and VanEck in the past month and had also expressed its disapproval over creative products like inverse or leveraged futures backed ETFs.