The ETF industry has shown some interest in covering the nascent cryptocurrency market through a Bitcoin offering, but potential sponsors are still struggling for the green light from the U.S. Securities and Exchange Commission.
Recently, VanEck and Rex Shares have withdrawn filings with the SEC to launch ETFs with indirect exposure to Bitcoin through the use of financial instruments that provide access to the price movements, such as futures contracts linked to the price of Bitcoin or an index in an attempt to capitalize on the growing popularity of the cryptocurrency. The sudden withdrawn proposals for Bitcoin ETFs have left some questioning the outlook for a cryptocurrency-related ETF.
Phil Bak, CEO of ACSI Funds and former head of ETF listings at NYSE, explained that the problem the two providers faced was simply an issue of timing, reports Tanzeel Akhtar for TheStreet.
“There is no precedent for the SEC approving ETFs based on upcoming futures contracts, so it is not a surprise to see the SEC ask for the filings to be withdrawn. The issuers wanted to get in the queue for approval as soon as possible,” Bak told the Street.
The Securities and Exchange Commission argued that these firms can not file a Bitcoin ETF until the underlying futures contracts are already in place.
“If Bitcoin futures are approved for trading, an ETF tracking those futures has a significantly higher likelihood of approval than the spot based products that were rejected last year,” Bak said.
If Bitcion futures are accepted for trading and hit a minimum liquidity threshold, Bak believed an issuer could quickly look to the SEC for exemptive relief.