The SEC rejects an ETF that replicates the price of Bitcoin (BTC)
Since last month, the battle for Bitcoin ETFs has been raging across the Atlantic. For years, the SEC has in fact refused any authorization of an index fund, these investments replicating an index or a group of companies, based on the BTC.
Nevertheless, a major turnaround took place last month. The American financial regulator has finally given its approval for the marketing of the ETF of the company ProShares. The latter also broke records on the day of its launch.
However, this authorization did not change the SEC’s position one iota on one particular point: the ban on any ETF based on the cash market. Indeed, the two ETFs now authorized are backed by Bitcoin futures contracts and not by the so-called “spot” market.
The company VanEck has just been confirmed this refusal in principle since the SEC has disapproved of the placing on the market of its ETF based on the cash market. While this might not come as much of a surprise, it is nonetheless a setback and a setback for BTC-based index funds in the United States.
👉 To read – United States: a “Bitcoin companies (BTC)” ETF approved by the SEC
Requests for authorization of a Bitcoin ETF (BTC) on the spot market by the SEC
While the SEC’s refusal is not unexpected, it is nonetheless a scathing response to the proposals of two members of the US Congress last week. Democrat Darren Soto and Republican Tom Emmer have indeed written to Gary Gensler, the director of the SEC, about the authorization of index funds based on the Bitcoin spot market.
According to Gensler and the SEC, an ETF in the spot market would be too risky for the investor. The financial regulator believes the price could be manipulated, unlike Bitcoin futures contracts.
For Soto and Emmer, this distinction between the two does not make sense. Indeed, if the spot market price is indeed subject to jolts, there is no reason that futures contracts are not also. The only objective of the latter is to speculate on the future price of BTC. They would therefore also be affected in the event of proven manipulation.
The SEC did not finally hear this argument and the authorization of the ETF of VanEck was therefore refused, citing the same arguments of possible fraudulent manipulation of the price.
👉 To go further – United States: towards the approval of a real Bitcoin ETF (BTC) by the SEC?
Authorization of a Bitcoin ETF (BTC) on the spot market recedes
A Bitcoin ETF in the spot market would directly expose the investor to the BTC price. He would neither have to store the cryptocurrencies, nor even buy them since the ETF would take care of it for him.
In other words, this type of index fund would likely be a direct competitor to exchange platforms, all with simplified use for the individual wanting to invest effortlessly.
However, according to the SEC, it is this direct exposure to platforms that is worrying. Indeed, the financial regulator considers that the latter have not demonstrated their ability to prevent any fraudulent manipulation of the price of BTC. We are therefore far from an authorization of a Bitcoin ETF based on the spot market in the United States.
👉 To read – United States: the SEC appointed to regulate American stablecoins
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About the author: Benjamin Allouch
Formerly a lawyer specializing in personal data and digital law, I quickly became interested in Bitcoin, blockchain technology and their legal implications. I am now an independent consultant and writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.