Canadian regulators just approved the world's first Bitcoin ETF. Here are the 5 things investors need to know about the outlook for a US version
Canadian regulators just approved the world’s first Bitcoin ETF. Here are the 5 things investors need to know about the outlook for a US version
FILE PHOTO: Broken representation of the Bitcoin virtual currency, placed on a monitor that displays stock graph and binary codes, are seen in this illustration picture Reuters This story is available exclusively to Insider subscribers. Become an Insider and start reading now. The Ontario Securities Commission approved the world’s first bitcoin exchange-traded fund on February 12, according to Reuters . Interest in bitcoin, and its price, continue to soar. The US regulator has not yet approved a bitcoin ETF. Insider breaks down the 5 things investors need to know about the outlook for a US bitcoin ETF. Visit the Business section of Insider for more stories .
Canada’s securities regulator last week approved the world’s first bitcoin exchange-traded fund, according to Reuters .
Developed by Purpose Investments Inc, a Toronto-based asset management firm, the ETF will enable investors to invest directly in physically settled bitcoin rather than derivatives, Reuters quoted the company as saying.
Bitcoin’s price is soaring and has hit record highs near $50,000. Since March last year, the price has increased 456%. Bitcoin’s price on February 15 Markets Insider
Over this time period, more and more institutional investors are getting involved, ranging from Elon Musk to BlackRock to MicroStrategy and Ruffer Investments .
Read more: A Ruffer portfolio manager invested a portion of his $4.8 billion fund in bitcoin. Here’s what swayed him to bet on crypto — and the 2 other ways he’s hedging against worrying speculative bubbles
Several investment banks, such as Bank of New York Mellon and Morgan Stanley , also look set to be launching custodial and trading services for digital assets.
Investors have been able to trade bitcoin futures on the Chicago Mercantile Exchange, as well as closed-end investment funds on the Toronto stock exchange.
In the US, accredited investors are also able to access closed-end funds, such as the Grayscale Bitcoin Trust and the Bitwise bitcoin fund .
However, compared to a closed-end fund, a bitcoin ETF could provide additional advantages, such as convenience as investors are not responsible for the protection and custody of the assets as well as democratization as retail investors can easily access the product.
In the US, the Securities and Exchange Commission have been reviewing applications for bitcoin ETFs since 2013. But have rejected all applications thus far.
Read more: Investors are flocking to trade Dogecoin and other hot digital tokens on Voyager, a platform with no Robinhood-style restrictions. Its CEO says Bitcoin will hit $100,000 this year — and shares 3 other cryptocurrencies to watch.
However, some experts believe 2021 could be the year this could change especially following Canada’s approval and institutional investor interest.
Insider breaks down the 5 key things to know on the current status and outlook for a US bitcoin ETF: 1. Changes at the Securities and Exchange Commission Gary Gensler, US President Joe Biden’s Securities Exchange Commission nominee Alex Wong/Getty Images
US President Joe Biden’s nominee for the head of the SEC is Gary Gensler, who is the former head of the commodity futures trading commission and previously taught a class on blockchain and cryptocurrencies at Massachusetts Institute of Technology.
Gensler’s previous role at MIT suggests he might look more favorably at the development of an ETF, as well as at regulation that will help the crypto market mature.
In an interview with Yahoo Finance , bitcoin bull and CEO of Galaxy Digital , Michael Novogratz said, “Gary taught a class on blockchain at MIT and on crypto. He understands it cold. He’s progressive, right? And progressives broadly are going to go after … the rent takers. Crypto is not a rent taker… Crypto is trying to disrupt the rent takers.”
Despite the many proposal rejections over the year, cryptocurrency and digital asset advocates have started to emerge within the SEC. In 2018, SEC commissioner Hester Peirce wrote a strong dissent on the SEC’s rejection of a bitcoin exchange-traded product.
“If we were to approve the ETP at issue here, investors could choose whether to buy it, or avoid it,” Peirce said in the dissent . “The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets. Accordingly, I dissent.”
Peirce reiterated this view in a December 10 podcast with CoinDesk and called for clearer cryptocurrency regulations on February 13.
“People are looking for other ways to get into this asset class through our regulated markets, and why not just acknowledge that and allow that to happen in the ways that people are more used to accessing assets?” Peirce told the podcast.
The combination of Gensler and Peirce could be a positive for bitcoin and the approval of an ETF.
In a February 9, Anthony Pompliano’s podcast , together with James Seyffart and Eric Balchunas, ETF analysts at Bloomberg Intelligence, explored the outlook for a bitcoin ETF.
Balchunas said the initial bitcoin ETF proposals coincided with the SEC taking a more conservative approach.
“I think the application for the bitcoin ETF came at a bad time, I think the SEC was pulling back,” Balchunas said. “It was liberal 15 years ago and now it’s become a little more conservative, but there is some new blood coming in now that might change the situation.” 2. VanEck submitted a new bitcoin ETF proposal at the end of December Bitcoin logo is seen displayed on an Android mobile phone Omar Marques/SOPA Images/LightRocket via Getty Images
Investment firm VanEck, known for ETFs and mutual funds, submitted another ETF proposal to the SEC on December 30, 2020. Regulators have continually rejected VanEck’s ETF proposals .
On CNBC , the CEO of VanEck, Jan van Eck said they filed based on a “couple of rays of hope”, including the SEC’s guidance on cryptocurrency custody , as well as regulatory developments in Canada.
Unless withdrawn by VanEck, this new proposal should help give insight into SEC’s outlook on the bitcoin ETF amid increased interest and under new leadership.
However, Cointelegraph reports the current proposal is facing a lawsuit from SolidX for plagiarism. 3. Eight firms have had proposals nixed since 2013. Here’s why they are getting rejected. Tyler and Cameron Winklevoss discuss bitcoin with Maria Bartiromo during FOX Business'”Wall Street Week” Astrid Stawiarz/Getty Images
In the United States, eight firms have tried, without success, since 2013 to create a bitcoin ETF, Todd Rosenbluth, director of ETF and mutual fund research at New York based CFRA, told Reuters.
The companies that have submitted proposals are: