For eight years, the U.S. Securities and Exchange Commission (SEC) silently approved Bitcoin (Bitcoin) The Exchange Traded Fund (ETF) triggered a wave of prosperity in the crypto sector last week and pushed the price of key digital currencies to Historical highH.
Although some analysts and industry participants have reservations about the nature of the approved products-ProShares Bitcoin Strategy ETF (BITO) and Valkyrie Bitcoin Strategy ETF (BTF) Based on futures Rather than tracking the spot price of Bitcoin-this development has been overwhelmingly hailed as a breakthrough moment in the history of crypto.
Significantly ahead of BITO Listed on the New York Stock Exchange, It’s not clear how much interest the new product will attract.On the first day of BITO, the trading volume exceeded even the most optimistic expectations because the new ETF delivered Record volumeAt the same time, the price of BTF fell slightly on the first day.
Despite the excitement of the crypto crowd, the question remains: Why is this happening now?
Years of regulatory resistance
ETF approval is a watershed in the industry. In a written statement to Cointelegraph, Bitcoin Foundation Chairman Brock Pierce said: “This moment has been awaited for a long time, because as early as 2013, many entrepreneurs and companies sought regulatory approval.”
Since the Winklevoss brothers first tried to obtain regulatory approval for Bitcoin ETFs eight years ago, the US Securities and Exchange Commission has developed the habit of rejecting or repeatedly postponing decisions on multiple proposed Bitcoin ETFs.
The US Securities and Exchange Commission has long believed that the underlying market for these proposed instruments is a minefield for unsuspecting traders. The main concerns of regulators include possible manipulation of bitcoin prices, insufficient liquidity, network security issues, and lack of transparency in transaction data required for asset pricing.
In early April, the chairman of the US Securities and Exchange Commission Gary Gensler (Gary Gensler) hinted for the first time that he might be open to ETFs that track the price of regulated bitcoin futures, rather than futures prices linked to actual assets. New round of proposal filingIn Gensler’s view, exposure to BTC futures, especially those regulated by the Investment Company Act of 1940, provides dual investor protection, which may be considered sufficient by the agency’s standards.
In late September, Gensler spoke at the Future of Asset Management Conference double Regarding the feasibility of trading products on the Bitcoin futures exchange, this indicates that the previous comments expressed a cautiously weighted stance, rather than a whimsical phrase.
-Nasdaq (@Nasdaq) October 22, 2021
In fact, the futures-based model resolves many of the US Securities and Exchange Commission’s complaints about investor protection of physical bitcoin products. Since investors are basically betting on whether the price of BTC will rise or fall, they do not need to be exposed to actual cryptocurrencies, nor do they need ETF providers to custody Bitcoin, thus eliminating a major source of regulatory headaches.
In addition, Bitcoin futures regulated by the Commodity Futures Trading Commission (CFTC) have been available on the Chicago Mercantile Exchange since 2017. This is a tool that has a good track record and is well-known to financial regulators.
Gary Gensler’s appointment to the position of the top securities regulator in April 2021 has excited many crypto communities, and he quickly proved that the relationship with the digital asset field is more complicated. In particular, his unremitting efforts to classify most crypto assets as securities and to supervise them prompted many in the industry to remove him from the list of cryptocurrency allies.
At the same time, as someone who undoubtedly knows one or two things about cryptocurrency and its potential, the chairman of the US Securities and Exchange Commission probably does not want to make himself the number one villain in the crypto industry. The final realization of futures-based Bitcoin ETFs can be regarded as the safest and cleanest way to make the industry look and feel like a major victory.
Brad Yasar, the founder and CEO of the decentralized financial platform EQIFI, believes that October 2021 will become two key logical points after the US Securities and Exchange Commission’s blockade on Bitcoin ETFs is finally lifted . The first is institutional inertia, that is, regulatory agencies need a lot of time to respond to the demand for new product categories, even if the time has come. Yasar said to Cointelegraph:
“The system has finally reached an approvable state through its cyclical work. Now multiple public entities hold a large amount of Bitcoin and report these assets quarterly, which does no harm, so regulators have more data points to evaluate.”
In Yasar’s view, the second component is that the SEC is facing great institutional pressure and needs to allow traditional financial institutions to easily obtain this alternative investment opportunity.
Among the camp of crypto intellectuals who tend to view the government and Wall Street as a united front against retail investors, some more peculiar explanations have emerged. According to this logic, futures-based ETFs mean higher fees and more institutional middlemen, who can benefit from the surge in investor interest in cryptocurrencies.
In a tweet, Ryan Selkis, founder of crypto investment company Messari (Ryan Selkis), believes that the US Securities and Exchange Commission is “just part of the cartel”.
I can’t wait to hope that JPMorgan Chase manipulates the BTC market like they manipulate the silver market.
This is why the SEC prefers futures ETFs with annual fees of 5-10% rather than spot ETFs with annual fees of 1-2%.
At this point, the SEC is only part of the cartel. pic.twitter.com/vc0VVKHUyE
— Ryan Serkis (@twobitidiot) October 15, 2021
Regardless of the reason that triggered the regulatory approval of an ETF, it could have a positive impact on the adoption and mainstreaming of cryptocurrencies. On the first day of the ProShares transaction, investors were incredibly excited about the new product, which proved that those who expected it to struggle were misled. Easily gaining Bitcoin exposure from one’s regular broker or retirement account seems to have attracted the interest of a large number of American investors.
Perhaps the time has come, and the simple notion that fighting the inevitable is meaningless has always been the best explanation.