Soon a Bitcoin ETF (BTC) based on the spot market?
After long years of waiting, the SEC, the financial regulator in the United States, has finally authorized a first Bitcoin ETF.
This index fund which, as its name suggests, replicates an index, is put into circulation by the company ProShares. It was a huge success from the moment it was launched.
However, the index tracked by this exchange traded fund is not the price of BTC as can be found on an exchange. The ETF is in fact based on futures contracts.
Some have long called for a Bitcoin ETF to follow the spot market. This is exactly what two members of the US Congress are asking for.
👉 On the same subject – Grayscale confirms its intention to transform its Grayscale Bitcoin Trust (GBTC) into an ETF
Two members of the US Congress want a real Bitcoin ETF (BTC)
Republican Tom Emmer and Democrat Darren Soto are two members of the United States House of Representatives. They are both part of the blockchain caucus in Congress.
Emmer and Soto jointly wrote a letter which they passed on to Gary Gensler, the director of the SEC. The post is unequivocal and calls for the adoption of a Bitcoin ETF based on the spot market. And they have arguments to make:
“We ask ourselves why, if you allow trading in an ETF based on derivative contracts, you do not allow […] Bitcoin cash based ETFs. Spot Bitcoin ETFs are directly asset-based, which inherently offers more protection for investors. “
Conversely, the two members of Congress therefore believe that Bitcoin ETFs based on futures contracts do not have the same guarantee of protection as a possible ETF based on the cash market.
👉 To read – United States: a “Bitcoin companies (BTC)” ETF approved by the SEC
What is the difference between the two types of Bitcoin ETFs (BTC)?
The reason for discussing and debating the need to adopt a Bitcoin ETF based on the spot market is that there is a fundamental difference between the two types of ETFs.
On the one hand, a real Bitcoin ETF would be a competitor to cryptocurrency exchange platforms. Indeed, as on an exchange, investors would not have to store their BTC themselves.
In addition, the ETF would take care of buying the assets itself, which would significantly reduce the “work” of the investor. The latter could then trade real BTC on the stock exchange.
On the other hand, currently licensed ETFs track the price of contracts speculating on the future price of BTC. They therefore do not have any assets. Emmer and Soto thus note that these index funds are more difficult for the average investor to understand.
The two members of the House of Representatives also dismiss the argument for more secure investment in futures contracts put forward by Gensler.
According to them, the possibility of fraud or manipulation of the cash market put forward by the director of the SEC is not valid. Indeed, if the spot market were to be manipulated, it would immediately have consequences on futures contracts.
In other words, choosing one ETF over another does not make sense to Emmer and Soto, who indicate that they have no preference for one or the other. We are now awaiting the response from Gary Gensler.
👉 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. Today, I am an independent consultant and writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.