By Josiah Wilmoth
The US Securities and Exchange Commission (SEC) has requested that several exchange-traded fund (ETF) providers withdraw applications to create bitcoin ETF products.
Bitcoin ETF Creators Yank Proposals
The quest to list the first bitcoin ETF encountered another regulatory hurdle this week, as multiple fund providers filed letters with the SEC withdrawing their applications to list funds that would have provided shareholders with exposure to the most prominent cryptocurrency’s price movements by trading bitcoin futures contracts.
Direxion Shares ETF Trust, VanEck, First Trust Advisors, ProShares Trust, and Exchange Listed Funds Trust had all filed to create bitcoin ETFs during the previous month, reflecting the widespread belief that the listing of bitcoin futures contracts on Chicago exchanges CME and CBOE was a seminal moment for bitcoin’s role as a financial instrument.
Even bitcoin skeptics had largely resigned themselves to the forecast that the SEC would quickly approve a bitcoin ETF that traded bitcoin futures, although some warned that this product could prove hazardous for retail investors.
SEC Places Another Regulatory Hurdle in Fund Managers’ Path
However, according to withdrawal letters filed by fund managers, the SEC was concerned both about the lack of liquidity in the bitcoin futures markets and the present valuations of the contracts.
“On a call with the Staff on January 5, 2018, the Staff expressed concerns regarding the liquidity and valuation of the underlying instruments in which the Fund intends to primarily invest and requested that the Trust withdraw the Amendment until such time as these concerns are resolved,” wrote Angela Brickl, secretary of Direxion, in the firm’s letter to the SEC.
The move presents bitcoin ETF proponents with an unforeseen hurdle. Previously, the SEC had declined to review bitcoin ETF applications that intended to trade bitcoin futures because the contracts did not exist, a problem that had a clear-cut solution. Now, though, the path to listing exchange-traded cryptocurrency funds appears far murkier.
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