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Crypto ETFs: Why is SEC concerned?

With Bitcoin reaching its all-time high of $64,863.10 this year, at least 18 exchange-traded fund (ETF) applications have been filed with the US Securities and Exchange Commission (SEC) — the official regulatory board primarily responsible for this type of asset.

Some might wonder, what does SEC have to do with crypto?

Bitcoin reached its all-time high 6 months ago | Source: ALPEX

Over the years, the US SEC has been rejecting proposals regarding Bitcoin ETFs. Even up to now, many still lie in wait for the approval of the US SEC. Although the first application for a US Bitcoin ETF began way back in 2013, the SEC remains hesitant on approving any crypto-related ETFs.

No one is sure whether it has something to do with a subjective or objective decision. However, last August 3, 2021, SEC Chairman Mr. Gary Gensler finally shared the reasons in forum.

In detail, the SEC has a three-part mission — to protect investors, facilitate capital formation, and maintain fair, orderly, and efficient markets in between them. Respectively, they also focus on financial stability. But at its core, they are all about investor protection. Thus, the key reason is the uncertainty of Bitcoin and the risk of market manipulation.

What is Crypto ETF?

Let’s take a closer look at what crypto ETF is. Simply put, it is a fund consisting of cryptocurrencies. As opposed to the common ETFs that track an index or a basket of assets, cryptocurrency ETFs track the price of one or more digital tokens.

By investing in an ETF, investors avoid having to go through the complicated process of buying cryptocurrency itself. Let’s say they bought Bitcoin. Since holders of the ETF will not be directly investing in Bitcoin, they won’t have to worry about the complex storage and security procedures required of cryptocurrency investors.

For crypto enthusiasts, they believe ETFs are the solution to boost liquidity and the adoption of cryptocurrencies for investment purposes.

Countries that approved Crypto ETF

Approximately six months have passed since Brazil offered its first-ever Bitcoin ETF. Meanwhile, Canada’s Purpose Ether ETF has surpassed 50,000 ETH. The country has also approved three Ethereum ETFs this year.

Despite the fact that cryptocurrency ETFs are not traded in U.S. markets, investors can invest in a variety of other products similar to ETFs for exposure to crypto. The closest product to a crypto ETF product is Grayscale’s Bitcoin Investment Trust (GBTC).

In conclusion, regulations aren’t inherently bad. There could be future SEC regulations that would open doors for big developments. Consequently, these could include more liquidity of digital assets or more promising investment options to those unfamiliar with the industry. On the other hand, increased bureaucracy might also cause significant setbacks. This would affect businesses, exchanges, and individuals invested in crypto anonymity.

For now, both regulators and investors are still unsure as to what is to come, and how exactly the future of crypto regulations will play out.

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ALPEX is a globally renowned digital asset spot and derivatives trading platform, aiming to provide the most innovative, professional, smooth, transparent and trustworthy digital asset trading services for traders worldwide.

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ALPEX is a cutting-edge digital asset and derivatives trading platform, created to provide the world’s best and most secure online trading experience.

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