Cryptocurrency investors are looking into new and improvised methods for bringing crypto exchange-traded funds (ETF) to life. U.S. regulators have widely disapproved Bitcoin-backed ETFs until there can be an acceptable method to counter nefarious trading activities in this nascent market.
Investors Sanguine On A Crypto ETF
With Bitcoin’s recent success, investors have proposed the idea of a Bitcoin ETF to be the next obvious step for the advancement of the cryptocurrency industry as a whole. An ETF, as per market experts, can be highly beneficial to cryptocurrency as a whole. According to The Block, popular bank JPMorgan exclaimed an ETF to be a ”holy grail” for the cryptocurrency market. Innovators believe the introduction of such a facility would enable retail investors to step into the market en-masse, further contributing to the growth of the cryptosphere.
Keeping these end goals in mind, several parties have taken an initiative to introduce a such a vehicle, which the U.S. Securities and Exchange Commission (SEC) may approve if measures to prevent spoofing of transactions surveillance are in place. In August, the regulator rejected nine Bitcoin funds for this very reason. However, this hasn’t stopped firms from trying to develop the flawless crypto ETF that satisfies the public needs, while still remaining secure.
Notably, three firms are on the run to obtain a crypto ETF: BlockForce Capital, Blockchain (the startup, not the technology), and Coinbase.
U.S. Regulators’ Demands For A Crypto ETF
Sadly, the SEC has denied all ambitions put out by various organizations so far. Speaking on this matter, Joe Saluzzi, the co-founder of Themis Trading said — “The SEC has been very clear in the prior crypto ETF rejections – they won’t approve a crypto ETF until proper surveillance measures in the spot market have been put in place.”
He further continued “Also, in light of the recent NY AG report which details the lack of surveillance at some of the biggest crypto exchanges, it is highly unlikely that the SEC will approve a crypto ETF any time.”
On experiencing difficulties in meeting the conditions set out by the SEC, industry leaders recommended a rather different approach. Saluzzi stated:
A futures-based fund, one that tracks the derivatives trading on CME and Cboe, would have a better chance of approval since they trade on regulated exchanges”. This too was turned down by the SEC, suspecting the product to experience manipulation.
Other exchanges have tried to integrate with pre-existing market manipulation surveillance measures. One such exchange is Gemini, which partnered up with Nasdaq, to survey and eliminate any chances of spoofed transactions to occur.
However, some exchanges such as Bitfinex, Bitstamp, and bitFlyer have put in no efforts to try and incorporate preventive measures into their network.
Benefits of an ETF to the Cryptocurrency Market
A crypto ETF can be highly beneficial to the blockchain industry. As said by JPMorgan, the price of Bitcoin can benefit from a BTC-centric ETF, just like how gold benefited from its own ETF in 2004.
“Launched in 2004, SPDR Gold Shares ETF was the first gold ETF approved in the US by the SEC. Since its launch, retail access to gold has skyrocketed as new investors more easily turn to the gold market as a portfolio diversifier and as a foundational asset.” the bank said.
If a crypto-backed ETF manages to gain regulatory traction, low cryptocurrency prices will soon be a thing of the past. Moreover, cryptocurrencies will start entering the traditional finance world, potentially taking over classical banking services in due time.