A few days ago, the U.S. Securities and Exchange Commission Chairman Gary Gensler signaled that regulators might be more open to Bitcoin ETF if it was based around futures than the cryptocurrency itself. Fund managers are already putting that at the test.
Within the last 24 hours both ProShares and Invesco register plans at the SEC for funds based on futures.
The filings for the Invesco Bitcoin Strategy ETF and the ProShares Bitcoin Strategy ETF could well be first of many. As regulators droop their feet on approval of a U.S. exchange-traded fund, applications have been piling up. ProShares and Invesco are among the more than a dozen ETF investors that filed directly for digital assets.
'With Gensler suggesting that the SEC is more likely to approve a future-based Bitcoin ETF over a physical one, the race is on for such products, said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. Will be more filed in the coming days?
In comments to the Aspen Security Forum on Tuesday, Gensler said that an ETF that complies with the SEC's strict rules for mutual funds could provide investors with necessary protections.
I look forward to the staff's review of such filings, particularly if those are limited to these CME-traded Bitcoin futures, he said.
Many crypto backers voiced distress over Gensler's announcement earlier this week about the Chairman's preferred structure. An ETF focused on Bitcoin futures would require investors to put a substantial amount of money on margin to trade, among other issues. Many who sought to buy bitcoin now are hoping for a physically-backed Bitcoin instead.
All of this adds unnecessary layers of middlemen and derivatives. It's not what the people want, said Eric Balchunas, Bloomberg Intelligence ETF analyst, via phone. Investors would be better served by an investment banking system and I really think they understand the risks. At this point even my mom knows what Bitcoin is about and that it's not the same as a Treasury.
The futures funds would yet attract assets because they'll be the best-possible offer right now, Balchunas said. It's basically like the Kentucky Derby, he said. 'It's like all these horses are now going to this other track and rushing to the starting gate in hopes of getting approved.
Meltem Demirors, chief strategy officer at CoinShares, says she's been tracking the U.S. product space closely and that an ETF has been elusive. However, she observes greater interest from institutions and their clients for crypto-centric products.
'We have seen an ongoing slew of applications filed for ETF accounts and funds of all types in the U.S. over the past few years, she said during a conference call discussing her company's latest earnings. 'Our perspective is that we're going to wait to see how the regulatory landscape evolves - particularly in light of the comments that Gary Gensler, the new chairman of the SEC, made earlier this week about his perception of what might be possible as a Bitcoin ETF.