Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Wall Street Steps Up Crypto ETF Push With SEC Verdict Unknowable

Stock Markets Mar 16, 2021 09:09AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Wall Street Steps Up Crypto ETF Push With SEC Verdict Unknowable

(Bloomberg) -- Issuers across the $5.9 trillion U.S. ETF industry are racing to win approval for the first Bitcoin fund, with one big hurdle standing before them: A regulator whose position right now is anyone’s guess.

At least four firms now have live applications for an exchange-traded fund tracking the largest cryptocurrency, with WisdomTree Investments (NASDAQ:WETF) joining their ranks late last week. VanEck Associates Corp., NYDIG Asset Management and Valkyrie Digital Assets were the names already in the running.

Their odds of approval are a complete unknown. The U.S. Securities and Exchange Commission has rejected all previous filings, but since then two Bitcoin ETFs launched in Canada, institutional acceptance of cryptocurrencies has snowballed and -- perhaps most importantly -- the regulator’s leadership has changed.

Gary Gensler, the nominee to be next SEC chairman, is known for having a more open stance toward cryptocurrencies. That means hopes are riding high, and applications are piling up even before he’s in place and despite the regulator being unlikely to make big policy changes in his absence.

“These funds are getting their ducks in a row,” said Todd Rosenbluth, director of ETF research for CFRA Research. “They’re getting their paperwork filed, so if or when the SEC does OK a Bitcoin ETF, these asset managers will be ready.”

Despite the shifting landscape, the early applications still look ambitious. U.S. regulators have raised concerns about Bitcoin’s infamous volatility and how that could whipsaw unsuspecting retail investors. There remain worries about manipulation and criminal activity, with the likes of Treasury Secretary Janet Yellen pointing to the threat of terrorist financing.

One particular issue involves last-minute rules proposed by the outgoing Trump administration that would create new requirements for financial services firms to record the identities of cryptocurrency holders. These could have far-reaching consequences for an industry that prizes anonymity, and it remains unclear how the Biden administration will deal with them.

Read more: Bitcoin Storm Brewing Over Trump’s Anti-Money Laundering Push

Issuers are pushing on regardless because of the stakes involved, with a potential bonanza on offer for the first to get an ETF over the line.

The Purpose Bitcoin ETF (TSX:BTCCb) in Canada, the first of its kind in North America, saw more than $165 million worth of shares change hands at its launch. One day later, just $14.6 million of shares traded in Evolve Fund Group’s Bitcoin ETF (TSX:EBIT) in its debut.

“The difference between being first and second in this two-ETF race hasn’t been so much gold versus silver as gold versus a participation trophy,” said Ben Johnson, Morningstar Inc.’s global director of ETF research.

‘Optimism Abounds’

With Gensler not due to take his position until later in the year, plenty in the industry still think approval is a long way off.

Yet in the past two years the SEC has shown its willingness to work with crypto companies “through guidance, requests for comment, statements and engagement through its innovation arm Finhub,” according to Jackson Mueller, director of policy and government relations at Securrency, a developer of Blockchain-based financial and regulatory technology.

The SEC didn’t respond to a request for comment from Bloomberg News.

Why a U.S. Bitcoin ETF Could Be a Real Thing in 2021: QuickTake

In addition to the four pending applications for a crypto ETF, there are other filings that appear to be seeking to sidestep SEC reticence by combining Bitcoin with other assets.

For example, Simplify Asset Management is working to launch an “equity plus Bitcoin” ETF that will invest up to 15% of its assets in cryptocurrencies indirectly through the Grayscale Bitcoin Trust (GBTC). Bitwise Asset Management filed for a fund filled with companies considered to be crypto innovators.

“With Canada recently approving Bitcoin ETFs and Gary Gensler poised to serve as SEC Chairman, optimism abounds,” said Nate Geraci, president of the ETF Store, an advisory firm. “Every issuer with any hope of having a meaningful Bitcoin ETF presence should be throwing their hat in the ring at this point.”

One of those is arguably Grayscale Investments, the firm behind GBTC. That’s an investment trust as opposed to an ETF, meaning there are different rules around share creation and trading.

Nonetheless, it’s been a smash hit, ballooning in size to more than $37 billion, up from only $1.9 billion a year ago. Now Grayscale is recruiting an entire ETF team, apparently in anticipation that the first American exchange-traded crypto products will eventually be approved.

Bitcoin’s price has skyrocketed around 10-fold in the past 12 months. The digital asset climbed above $60,000 for the first time this weekend before dropping to below $56,000 by Tuesday morning in New York.

With so much potential cash involved, the SEC should consider approving multiple filings at once to “avoid giving any issuer a significant first-mover advantage,” James Seyffart, ETF analyst for Bloomberg Intelligence, wrote in a recent note.

If that happens, the funds currently trying their luck with applications could be richly rewarded.

“All of these firms want to be at the starting line with their feet on the blocks if and when the SEC pulls the trigger,” said Johnson at Morningstar.

©2021 Bloomberg L.P.

 

Wall Street Steps Up Crypto ETF Push With SEC Verdict Unknowable
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email