After SEC Feedback, Several Firms Withdraw Bids to List Bitcoin ETFs
Several fund managers have shelved bids to launch bitcoin exchange-traded funds (ETFs), citing push back from the Securities and Exchange Commission (SEC). The regulator, which has taken a hard stance on bitcoin in the past, expressed concerns over liquidity and valuation of futures contracts backed by the cryptocurrency.
In a recent letter published online, Direxion and Exchange Listed Funds announced that they had cancelled their bids to launch ETFs that track bitcoin futures. ProShares Trust also issued a latter one day later informing the public that it will not pursue the matter further.
Unlike the cryptocurrency itself, bitcoin ETFs can be traded by retail investors as easily as stocks and other financial products. It would also allow them to gain exposure to the digital asset without the volatility of trading it directly.
Proponents of the ETFs had high hopes the filings would be approved following the launch of bitcoin futures contracts on the CBOE and CME exchanges last month. The coin’s 1,500% surge last year created a sense of urgency for fund managers to get in on the action.
Interestingly, the SEC does not regulate futures, as that is the domain of the Commodity Futures Trading Commission (CFTC). The CFTC is being pressured to reassess the bitcoin futures contracts for underlying risks.
Last year, the SEC failed to approve a high-profile bitcoin ETF backed by billionaire investors Cameron and Tyler Winklevoss. At the time, the securities regulator cited “concerns about the potential for fraudulent or manipulative acts and practices” related to bitcoin. Although that line of reasoning likely still persists, regulators now appear to be more concerned with volatility.
While volatility has been part and parcel of digital currency trading, the general trajectory of the market has been overwhelmingly higher. A flood of exchanges has rushed to get in on the action, although many have been unable to scale fast enough to meet demand. As a result, several major exchanges, including Bitstamp and Bitfinex, have instituted temporary blocks on new accounts.
Bitcoin has started the year in rocky waters, as investors seem to favor the more diverse altcoin universe. The original blockchain has seen its overall market share decline to roughly one third, with the likes of Ripple and Ethereum witnessing an upsurge in demand.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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