In the past regulators have shot down various attempts to introduce ETFs that track the price of Bitcoin in the U.S. out of concern that Bitcoin prices on unregulated digital currency exchanges could be manipulated. But that concern doesn’t exist for Bitcoin futures trading on a major exchange that’s fully regulated.
Jo Torode, a financial crime lawyer at Ropes & Gray in London told Reuters recently:
“Bitcoin futures will speed up the march towards legitimization of an asset class that only a few years ago many law enforcement agencies would have argued had limited legitimate reasons for people to use,”
According to its real-time filings system EDGAR, the SEC received new applications for REX Bitcoin Strategy ETF, and REX Short Bitcoin Strategy ETF on Dec. 8 and VanEck Vectors Bitcoin Strategy ETF on Monday. These two companies have recently applied to the US Securities and Exchange Commission (SEC) for approval of their new Bitcoin Exchange-Traded Funds (ETFs).
Neither of the companies operating these funds would hold Bitcoin directly – the ETFs will be based on futures contracts and other Bitcoin-linked derivatives. If any one of the applications gets approval it would become the first operating Bitcoin ETF in the world.
ETFs are important for Bitcoin
An ETF is an investment fund that tracks an underlying index, asset, or basket of assets, and itself trades like a common stock. An ETF for Bitcoin would provide investment and trading opportunities for players who don’t want to deal with buying and storing cryptocurrency directly.
For more traditional, wary investors a Bitcoin ETF would be an ideal solution as the entity offering the ETF, not the ETF investor, is responsible for the ownership and security of the underlying cryptocurrency.
Bitcoin ETF History
Over the past months, the SEC has received a number of Bitcoin ETF applications, but so far the commission has yet to approve any of them. One of the main reasons for that is the unregulated nature of cryptocurrency. That was exactly the case when earlier this year the SEC rejected the application of the Winklevoss twins’ Bitcoin ETF COIN.
It should also be noted that VanEck already tried filing for an ETF this September. The Commission rejected that application, explaining that VanEck was planning to base their fund on Bitcoin futures which were not actually available at that time.
Now that Bitcoin-based futures are available through CBOE, which launched its Bitcoin futures trading on December 10th, and soon through CME which is planning to do the same on December 18th. Many financial analysts assume that the introduction of futures trading could mean the green light for the new Bitcoin ETFs.
Dave Chapman, Managing Director of Octagon Strategy, said in an interview with CNBC:
“As a result of the SEC approving both the futures on CBOE and CME, and in NASDAQ next year, I will go happily on the record in betting that we will see an ETF for Bitcoin approved in 2018.”
Andreas M. Antonopoulos talks about Bitcoin Forks and The Bitcoin Futures Market: