The US Securities and Exchange Commission (SEC) is reconsidering its stance on spot bitcoin exchange-traded funds (ETFs), according to its chair Gary Gensler. In a recent interview with Bloomberg, Gensler said that the SEC is taking a “new look” at the proposals for spot bitcoin ETFs, which would track the price of the cryptocurrency directly, rather than through futures contracts or other derivatives.
Gensler’s comments suggest that the SEC may be more open to approving spot bitcoin ETFs, which have been repeatedly rejected by the regulator in the past due to concerns over market manipulation, fraud, and lack of transparency. The SEC has only approved bitcoin futures ETFs so far, which are based on contracts traded on regulated exchanges such as the Chicago Mercantile Exchange (CME).
But what is the difference between spot bitcoin ETFs and futures bitcoin ETFs? A spot bitcoin ETF would allow investors to buy and sell shares that represent the actual bitcoin held by the fund, while a futures bitcoin ETF would allow investors to buy and sell shares that represent contracts that bet on the future price of bitcoin. A spot bitcoin ETF would reflect the current market price of bitcoin, while a futures bitcoin ETF would reflect the expected future price of bitcoin.
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Spot bitcoin ETFs are seen as a more convenient and cost-effective way for investors to gain exposure to bitcoin, without having to deal with the technical and security challenges of buying and storing the cryptocurrency directly. However, spot bitcoin ETFs also face more regulatory hurdles and risks, as they would require the SEC to approve the underlying bitcoin market, which is largely unregulated and prone to manipulation, fraud, and hacking.
However, Gensler also cautioned that the SEC still has high standards for any spot bitcoin ETFs that seek its approval. He said that the SEC would need to see robust oversight and surveillance of the underlying bitcoin market, as well as adequate investor protection and disclosure. He also said that the SEC would consider the environmental impact of bitcoin mining, which consumes a large amount of energy and generates greenhouse gas emissions.
Gensler’s remarks come amid growing demand and interest for spot bitcoin ETFs from investors and industry players. Several firms, including Fidelity, VanEck, and Valkyrie, have filed applications for spot bitcoin ETFs with the SEC, hoping to tap into the growing popularity and adoption of the cryptocurrency.
Spot bitcoin ETFs are seen as a more convenient and cost-effective way for investors to gain exposure to bitcoin, without having to deal with the technical and security challenges of buying and storing the cryptocurrency directly.
The SEC has not yet made a decision on any of the pending spot bitcoin ETF applications, but it is expected to do so in the coming months. The SEC has set a deadline of February 14, 2024, to approve or deny VanEck’s spot bitcoin ETF proposal, which was filed in March 2023.
The SEC has also extended its review period for Fidelity’s spot bitcoin ETF proposal, which was filed in May 2023, until January 26, 2024. The SEC has not yet announced a timeline for Valkyrie’s spot bitcoin ETF proposal, which was filed in July 2023.
