The SEC has denied VanEck’s proposal to list a bitcoin spot ETF on Cboe Global Markets Inc. The SEC had until Nov. 14, 2021, to approve a VanEck spot bitcoin ETF.
Pessimists believe no spot ETF approval will occur before 2022, and many crypto enthusiasts believe no spot ETF approval will occur until 2023.
Since the underlying market cannot be exploited, exchanges must submit Form 19b-4, which is governed by the 1933 Securities Act. Futures ETFs are not subject to the 1940 Investment Company Act or equivalent rules.
Gary Gensler, the former chairman of the Commodity Futures Trading Commission, approved the first bitcoin futures ETF in late October, and the second on Oct. 22. He’s also fine with futures-based ETFs because the Commodity Futures Trading Commission regulates them.
Why was spot ETF rejected?
Without legislation specifying which regulatory authorities have responsibility for sections of the crypto business-like exchanges, Gensler is reluctant to authorize a spot bitcoin ETF.
A spot bitcoin ETF would monitor the price of bitcoin immediately, without requiring customers to possess the cryptocurrency and manage wallets, etc.
The SEC is concerned that a product based on Bitcoin’s spot price may violate securities laws due to market volatility.
Futures are secured
Investors are exposed to an ETF’s performance, even if they don’t hold the assets directly. A futures ETF buys or sells a contract representing the future value of a coin.
The contract specifies a future purchase or sale of cryptocurrency. So futures are safe from cryptocurrency volatility.
These futures contracts will be expensive if individuals believe bitcoin’s price will grow. A bitcoin futures ETF’s value is determined by the price of futures contracts. The CME trades these futures contracts.
In July 2021, the Winklevoss twins, Cameron and Tyler, filed with the SEC for a bitcoin ETF, the Winklevoss Bitcoin Trust. The SEC denied their application twice.
ProShares, Direxion and GraniteShares, Bitwise, Wilshire Phoenix, and WisdomTree have all filed and been denied.
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