Crypto

SEC denies authorization of an ETF that replicates the price of Bitcoin (BTC)

SEC rejects an ETF that replicates the price of Bitcoin (BTC)

Since last month, the battle for Bitcoin ETFs has raged across the Atlantic. For years, the SEC has in fact rejected any authorization of an index fund, these investments replicate an index or a group of companies, based on the BTC.

However, a major change occurred last month. The US financial regulator has finally approved the commercialization of the ProShares ETF. The latter also broke records on the day of its release.

However, this authorization did not change one iota of the SEC’s position on one point in particular: the ban on any cash market-based ETF. In fact, the two now authorized ETFs are backed by Bitcoin futures contracts and not by the so-called “spot” market.

The VanEck company has just confirmed this refusal in principle, as the SEC has disapproved of the market placement of its cash-based ETF. While this may not come as a surprise, it is a setback and a setback for BTC-based index funds in the United States.

👉 Read – United States: An SEC Approved “Bitcoin Companies (BTC)” ETF

Requests for authorization of a Bitcoin ETF (BTC) in the spot market by the SEC

While the SEC’s refusal is not unexpected, it is nonetheless a scathing response to proposals by two members of the United States Congress last week. In fact, Democrat Darren Soto and Republican Tom Emmer have written to SEC Director Gary Gensler about authorizing index funds based on the Bitcoin spot market.

According to Gensler and the SEC, an ETF in the spot market would be too risky for the investor. The financial regulator believes that the price could be manipulated, unlike Bitcoin futures contracts.

For Soto and Emmer, this distinction between the two makes no sense. In fact, if the spot market price is subject to shocks, there is no reason why futures contracts should not be as well. The sole objective of the latter is to speculate on the future price of BTC. Therefore, they would also be affected in case of proven manipulation.

The SEC ultimately did not hear this argument and therefore the authorization of the VanEck ETF was denied, citing the same arguments of possible fraudulent price manipulation.

👉 To Go Further – United States: Towards SEC Approval of a Real Bitcoin ETF (BTC)?

The authorization of a Bitcoin ETF (BTC) in the spot market goes backwards

A Bitcoin ETF on the spot market would directly expose the investor to the price of BTC. You wouldn’t have to store the cryptocurrencies, or even buy them, as the ETF would take care of it.

In other words, this type of index fund would likely be a direct competitor to exchange platforms, all with simplified use for the individual who wishes to invest effortlessly.

However, according to the SEC, it is this direct exposure to platforms that is of concern. In fact, the financial regulator considers that the latter have not demonstrated their ability to prevent any fraudulent manipulation of the price of BTC. Therefore, we are far from an authorization of a Bitcoin ETF based on the US spot market.

👉 Read – United States: SEC appointed to regulate US stablecoins

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About the author: Benjamin Allouch

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A former personal data and digital law attorney, I quickly became interested in Bitcoin, blockchain technology, and its legal implications. Now I am a consultant and freelance writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.

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