While the US Securities and Exchange Commission (SEC) reversed course on a slew of recent denials of cryptocurrency-based exchange-traded funds (ETF), the investment community began to wonder if, perhaps, it would see an approval by the end of this year. Many believe that an ETF could be seen in the near future, but there are still a couple of questions that need to be addressed before they hit the markets, namely, the regulation of the vehicles.
An ETF is any type of fund – mutual, hedge, etc. – that is traded on a regulated exchange. They are, in general assets that are regulated by the SEC or the Commodities Futures Trading Commission (CFTC), and crypto is still not under their guidance. For a crypto-based ETF to be offered and approved, it would have to register shareholder interests in the fund as securities while the assets are still unregulated. Herein lies the conundrum.
A Bitcoin ETF is still at the top of the most wanted list of institutional investors. Many believe that, while it’s not an essential factor for crypto mainstream growth, it is a significant driving factor and could be the catalyst that propels the market to new heights, similar to the prices seen last year when Bitcoin reached $20,000.
Over the past several weeks, there has been increased interest in pushing for SEC approval of a Bitcoin ETF, but the spate of rejections last month – nine in total – dampened spirits somewhat. When the SEC recanted the rejection and said that it would review the proposals again, this had a positive impact on the possibility that crypto ETFs were not yet dead.
In addition to the review of the nine ETFs, the SEC has also announced that it expects to make a ruling on another ETF, specifically the VanEck/SolidX proposal, by the end of this month. Given that this ETF is backed by a regulated financial entity, it is seen as the most likely to receive approval.
While the SEC could make a decision this month, it is more probable that the community will have to wait until next year for an ETF to be introduced. The SEC, even if it doesn’t publicly admit it, has to respond to the traditional finance industry – hardcore crypto opponents – and be able to properly justify a decision that favors cryptocurrency-based products. This isn’t an easy task and requires a delicate touch to ensure that it allows for the continued growth of crypto without giving the appearance that it believes crypto is more powerful than the dollar.