After shutting down the idea in 2017, the SEC has officially initiated a formal inquiry into the possibility of allowing Bitcoin exchange-traded funds (ETFs) via a change to one or more of its rules.
Institutional Investors Incoming
According to an official release from the Securities and Exchange Commission (SEC), formal proceedings are set to begin in regards to listing the first Bitcoin exchange-traded funds (ETFs) in the United States.
Bitcoin ETFs would effectively provide significantly greater exposure to Bitcoin futures contracts — which themselves have been somewhat controversial among cryptocurrency proponents — while affording investors the ability to comfortably diversify their portfolios with the gold standard of cryptocurrency.
The rule which would have to be changed to allow Bitcoin ETFs is Section 19(b)(2)(B) of the 1934 Securities and Exchange Act. Explains the agency:
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved.
Various issuers have already issued formal requests to launch Bitcoin ETFs — including ProShares, Direxion, Exchange Listed Funds, VanEck, REX ETF, and the Winklevoss twins — but to no avail.
SEC takes formal action in order to adapt legislation to list ProShares’s BTC ETFs (futures-settled contracts, not purely asset-backed for now)
(This perhaps explains the ramp up in OTC buying activity last weeks)https://t.co/O7eI2twbty
— Foreground Research (@ForegroundBlock) April 6, 2018
The legal adoption of a Bitcoin-backed ETF would almost certainly help facilitate institutional adoption from those fearfully waiting on the sidelines. In doing so, the Bitcoin market would also see greater liquidity.
‘Absolutely Not’ All ICOs are Frauds
News of the SEC’s formal inquiry into Bitcoin ETFs comes after the agency’s chairman, Jay Clayton, has reiterated the stance that oversight is good for the cryptocurrency industry as a whole.
As noted by Fortune, Clayton claimed that “absolutely not” all ICOs are fraudulent in a speech at Princeton University.
At the same time, the SEC has taken legal action against the founders of Centra Tech — a scam ICO backed by celebrity endorsements from DJ Khaled and Floyd Mayweather. Stated Clayton:
I think if we don’t stop the fraudsters, there is a serious risk [of a] regulatory pendulum — the regulatory actions will be so severe that they will restrict the capacity of this new security.
Do you think Bitcoin ETFs are an inevitability? Do you think more regulatory oversight is good for the cryptocurrency space? Let us know in the comments below!
Images courtesy of Shutterstock, Bitcoinist archives, and Twitter/@ForegroundBlock.
SIGN UP FOR LIGHTCHAIN 2025 - BUY NOW