Published: November 17th, 2021
This year saw the launch of bitcoin spot exchange-traded funds (ETFs) in Brazil, Canada, and Dubai, but they continue to meet resistance from the US Securities and Exchange Commission (SEC).
While America’s chief finance watchdog said yes to a ‘futures’ bitcoin ETF from ProShares in April, its rejected every application for a spot ETF, a vehicle that would give investors direct exposure to cryptocurrencies. The SEC says it's worried about potential market manipulation by cryptocurrency traders, and it's currently sitting on several spot ETF applications.
Since the first proposal for a bitcoin ETF was filed in 2013, a spot crypto ETF has become a bit of a holy grail for US crypto enthusiasts.
An exchange-traded fund is a publicly-traded instrument pegged to the value of an underlying asset, with bitcoin being the natural underlying asset for a first crypto ETF. US advocates argue that the technical complexities of private keys, crypto wallets, and exchanges create a barrier for broader entry into the crypto space for newbie investors. They say that a bitcoin ETF would add market liquidity and allow more investors to try their hand at crypto investing without holding cryptocurrencies directly.
Several US companies have submitted ETF proposals to the SEC that would offer exposure to BTC. Here are the leading contenders.
Global investment management firm VanEck, a specialist in creating traditional ETFs, made one of the first crypto ETF submissions to the SEC. Its first attempt, a bitcoin ETF called the VanEck SolidX Bitcoin Trust, was filed in 2018.
Facing stiff resistance from then SEC chair Jay Clayton, a noted crypto sceptic, the application was withdrawn in September 2019. When Clayton left the role at the end of 2019, within days, VanEck made a new application for its VanEck Bitcoin Trust, with shares of the trust trading on the Cboe BZX Exchange is approved.
Another contender who saw an opportunity in Clayton’s departure from the SEC was New York Digital Investment Group (NYDIG). Teaming up with advisory firm Stone Ridge, they submitted a crypto ETF proposal earlier this year.
The February filing came on the same day bitcoin reached USD 50,000 for the first time ever. The SEC has been silent on the application so far and has yet to announce its review of NYDIG's bid.
Another entrant in the race for a spot ETF is asset manager Valkyrie. The firm filed an application for approval of a bitcoin ETF in January that would use the Chicago Mercantile Exchange's reference price for BTC as its tracking mechanism and trade on the New York Stock Exchange Arca system. Crypto custodian firm Xapo would hold the fund's holdings of BTC in cold storage.
Valkyrie’s risk assessment accompanying the application acknowledged the bitcoin’s volatility, saying the ‘potential consequences of a sudden BTC price crash could negatively impact the value of the ETF shares.'
New York-based asset manager WisdomTree can draw on its experience of successfully running a bitcoin ETF in Switzerland's back in 2019. In March of this year, it joined the queue of US crypto ETF contenders, filing a proposal with the SEC for a WisdomTree Bitcoin Trust, which would trade on the Cboe bZx Exchange if successful.
Since then, the regulator has sat on its hands, first inviting public feedback on the submission and then saying that it needed more time to consider the issues noted during the public consultation. In September, the SEC said it would make a decision on the WisdomTree Bitcoin Trust application on December 11, 2021.
March 2021 saw a number of BTC ETF applications, with Fidelity Investment’s Wise Origin Bitcoin Trust amongst the lot. If successful, the application would see Fidelity become the fund’s administrator, while the firm’s Digital Assets division would hold custody of the BTC underlying the ETF.
Also in March, hedge fund SkyBridge Capital submitted a bitcoin ETF proposal with the SEC. The firm, run by former Trump communications director Anthony Scaramucci, operates a bitcoin fund for accredited investors.
Scaramucci told Bloomberg at the time was hopeful that a BTC ETF could be approved by the end of this year. He hoped incoming SEC chair Gary Gensler might be amenable to a bitcoin ETF, a safe vehicle that would make it easier for new crypto investors to enter the market.
A few months later, in April, Cboe Global Markets filed a separate proposal to list Fidelity’s Bitcoin ETF, saying that the regulators concerns about crypto market manipulation have been addressed by ‘increasing market maturity and institutional adoption of the cryptocurrency.’ In May, the SEC announced it was reviewing Fidelity's application.
Based in the US state of Delaware, new venture Kryptoin filed its first bitcoin ETF proposal back in October 2019. Called the w Kryptoin Bitcoin ETF Trust, it would be listed on the NYSE’s Arca exchange is approved. In April this year, the company revised its proposal and said the ETF would be listed on Cboe’s BZX Exchange instead of NYSE. The new filing also named the partners who would take part in the running of the fund, which included crypto exchange Gemini as custodian for the trust's BTC holdings.
In June 2021, the SEC announced that Kryptoin’s application was now officially under review. However, by July, it had postponed its decision on the filing, saying it would be ‘appropriate to set a more extended period to take action’.
In September, the commission delayed its decision again, with a new date of December 24, 2021, set to announce its verdict. This time, the SEC's announcement pointed to the need for more time ‘to consider the issues raised in the public consultation regarding Kryptoin’s application’.
The most recent application for a crypto ETF comes from fund manager Global X Digital Assets, which filed its SEC application in July 2021. If approved, the nascent Global X Bitcoin Trust would trade on Cboe’s BZX exchange, with Bank of New York Mellon acting as the trust's administrator.