Just like cryptocurrencies, Bitcoin ETF is making waves in 2021.
The prices of popular cryptocurrencies, such as Bitcoin and Ethereum, have drastically changed over the past few months. Many altcoins have also entered the crypto space.
Despite all these interesting moves in the crypto industry, the U.S. Securities and Exchange Commission remains firm in regulating all the buzz surrounding cryptocurrency. The SEC has previously blocked efforts to launch a Bitcoin exchange-traded fund. Canada has now approved cryptocurrency ETFs but the SEC has not followed that path.
The United States only has cryptocurrency trusts like the Grayscale Bitcoin Trust (GBTC). These trusts do not trade on major exchanges, sell at discounts to their asset values, and have poor liquidity. A Bitcoin ETF may provide a cleaner and investor-friendly solution to these issues.
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The time for crypto ETFs has come
The new presidential administration and new chairman at the SEC have raised hopes that the SEC may change its stance on cryptocurrency. But this may be a gradual process.
Crypto traders and investors believe that the SEC should have approved ETFs by now. According to Matthew Le Merle (the managing partner of Blockchain Coinvestors), “It’s difficult for a regulator to approve an ETF if the underlying asset is a new or not that well-understood, but that is nonetheless their job – to make investable assets easily accessible to the broadest possible audience, and ETFs are one of the best solutions to that.”
Why is the SEC hesitating to approve ETF? The SEC wants a broad market with significant trading volume and transparency in pricing before it approves ETF. Crypto supporters push back on this argument.
The SEC has approved ETFs for different instruments like dry bulk shipping, equity volatility, and different metals and grains.
Le Merle states that the concerns SEC had about Bitcoin’s underlying market two years ago were valid. The SEC wants to ensure that there is no price manipulation on the assets that will go into an ETF.
“We feel like the lawmakers and regulators are supposed to open up access to democratize investing in appropriate ways, and fundamentally ETFs provide more access, so they’re a good thing,” says Le Merle.
Will ETFs strangle the crypto industry?
SEC regulation of the crypto industry could affect the sector’s innovation. Some things have been achieved in cryptocurrency because it is an open environment. However, we can still enjoy some benefits from the SEC’s active role through its new chairman.
Ben Weiss, the CEO, and co-founder of CoinFlip stated that “Gensler knows a lot about crypto and taught classes on the subject. Once you understand and see the potential, it’s hard to be opposed to it. Regulations are good for the industry and he’s knowledgeable and can make smart and sensible regulations.”
Also, if Bitcoin ETFs are not approved by the SEC, it could be harmful by hindering innovation in a promising industry.
On a similar note, some Bitcoin proponents are concerned that ETFs could make things difficult for lots of independent cryptocurrency exchanges and businesses. There’s a huge anti-Wall Street sentiment among traders. So, there could be a backlash if crypto is centralized at an institutional ETF.
However, it is not everyone that is worried. According to Weiss, “The point of Bitcoin is to hold your coin. But there’s room for every sort of business and player in the industry and as much access as possible. I think people should hold their coin, but for people that can’t, such as pension funds, ETFs won’t monopolize the market.”
Crypto supporters are not bothered by people using ETFs to bet against the market. Le Merle supported this by saying; “A high-quality market needs to have two sides. (As) much as we may not like the people who focus on shorting, the market does work better if there are two sides to every trade.”