Bitcoin has been a topic of controversy, with some people questioning the validity and purpose of cryptocurrencies. Some believe it to be money laundering tool while others argue that is not because they are decentralized and would never have any control over use by centralized entities.
Bitcoin’s role as an unregulated instrument has led many banks to consider banning them from their institution all together as well due in part to its high volatility nature which can make investing difficult for inexperienced investors who may not know what or how much they’re buying into when participating in bitcoin trading markets.
The battered crypto market is reassessing the chances of U.S. regulators approving a spot-based bitcoin ETF after today’s release of hawkish Federal Reserve minutes, according to CNBC citing unnamed sources close to the matter.
With a spot-based ETF, you can have exposure to bitcoin (BTC) without ever having to own the cryptocurrency itself. This would increase institutional participation in the crypto market and boost its growth.
The U.S. Securities and Exchange Commission (SEC) has repeatedly denied bitcoin ETFs that would trade on spot – instead of futures contracts – citing a lack of market surveillance, high risk for manipulation, and insufficient regulation in the cryptocurrency space as reasons to keep them off their markets.
Some experts are optimistic again, thanks to the SEC’s decision to approve Teucrium’s futures-based ETF filed under the Securities Act of 1933.
The 1933 Act governing spot-based ETFs requires filling form 19B-4, detailing how the underlying asset is resistant to manipulation. Applications for future based ETFs approved since October 2021 were filed under the Investment Company Act of 1940 and do not require submission of Form 19B-4.
The Act of 1940 is often cited as a key reason that the SEC will not approve bitcoin ETFs. Last year, SEC Chairman Gary Gensler had said he favored futures-based funds over a spot bitcoin ETF, mentioning the 1940 act as appropriate for approving instruments based on them.
Bloomberg’s ETF analyst, Henry Jim tweeted “The SEC approves Teucrium Bitcoin Futures ETF filed in 33 Act structure. All previous BTC futures ETFs were in 40 Act structure.” Bottom line: this increases the chances of a ‘spot’ bitcoin ETF being approved because it can only be created with the use of a 33 Act Structure.
The head of Greyscale, Michael Sonnenshein, said in a tweet thread that the SEC “must be comfortable with Bitcoin spot ETFs too, if they are comfortable with Bitcoin futures ETFs. The 40 Act is no longer a factor that differentiates them.”
According to Sonnenshein, the Securities and Exchange Commission approved Teucrium’s application on grounds that bitcoin futures would be traded at the Chicago Mercantile Exchange (CME). However, CME bitcoin futures are influenced by unregulated spot markets.
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Grayscale has applied to convert it into an exchange-traded fund. Despite the potential for success, some observers are skeptical as oversight of the overseas exchange market is still dominated by large investors.
Laurent Kssis, managing director and head of Europe at crypto exchange-traded fund firm Hashdex, told CoinDesk that the SEC would continue to reject a spot ETF due to manipulation on unregulated spot crypto exchanges they cannot oversee. Keeping the cash market unregulated, Kssis believes regulators will avoid spot-based products.
Via this site.