Could Crypto ETFs Finally Come In From The Cold?

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The SEC will give a ‘yes-or-no’ ruling on its approval of the bitcoin-based exchange-traded fund (ETF) from Bitwise Investments by October 13.

It’s here. D-Day. Will it, won’t it? By Monday, we’ll know if the SEC passed a bitcoin ETF proposed by Bitwise Investments. If approved, the crypto ETF would trade as the Bitwise Bitcoin ETF Trust.

The SEC’s approval would be a landmark event in the evolution of cryptocurrencies.

“We’re closer than we’ve ever been before to getting a bitcoin ETF approved,” said Matt Hougan, MD, and global head of research, Bitwise. He was speaking Monday on CNBC’s “ETF Edge.” “Sometime before Monday, the SEC has to give its decision: yes or no. They have no more ways to postpone it at this point,” he said.

The SEC and Bitcoin ETFs

There have been several casualties on the tortuous route to the SEC’s approval for Bitcoin ETFs. The applications given up for dead include the bitcoin ETFs from the Winklevoss twins, CBOE Global Markets, and VanEck/SolidX.

So, what has changed, and why are we hoping for a thaw in the SEC’s attitude on the Bitwise ETF?

Plenty, according to Matt Hougan, managing director and global head of research at Bitwise.

The Bitcoin market is no longer the Wild West

A lot of water has passed under the bridge in the last couple of years, says Hougan. And most of it is pretty positive for Bitcoin ETFs:

  • The arrival of big names like Fidelity and CoinBase as regulated, insured custodians, with hundreds of millions of dollars of insurance from Lloyd’s
  • Regulated crypto exchanges.
  • The advent of major market makers such as Jane Street Capital and Susquehanna
  • Narrow trading spreads
  • A market trading $200 million in volume and regulated futures daily

These factors would make it much easier for the SEC to consider approving the Bitwise ETF.

Bitcoin ETFs: A wealth generation opportunity, even for Grandma

According to Hougan, a bitcoin ETF would allow everyday investors to safely access bitcoins. Bitcoins are a new and high potential asset class.

ETF regulations simplified: Another sign of the thaw?

Recent changes in ETF regulation have simplified “exemptive relief.” It’s a factor that made the process very cumbersome and longer for issuers.

The SEC press release says:

The Commission voted to adopt a new rule and form amendments designed to modernize the regulatory framework for exchange-traded funds (“ETFs”).  Rule 6c-11 will permit ETFs that satisfy certain conditions to operate within the scope of the Investment Company Act of 1940 (the “Act”), and come directly to market without the cost and delay of obtaining an exemptive order.  This should facilitate greater competition and innovation in the ETF marketplace by lowering barriers to entry.

According to one view, the simplified regulation could free up SEC resources and staff to focus on innovative new products, such as crypto ETFs.

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