U.S. Reps. Tom Emmer (R-MN) and Darren Soto (D-FL) are asking Securities and Exchange Commission (SEC) Chairman Gary Gensler why the SEC is allowing an exchange-traded fund (ETF) based on derivatives contracts to trade but not a Bitcoin spot ETF to trade.
“The SEC’s approach to cryptocurrency regulation has been unacceptable. While the trading of Bitcoin futures ETFs is a great step forward for the millions of American investors who have been demanding regulatory clarity, it does not make sense that Bitcoin spot ETFs cannot also commence trading. As I am sure Chairman Gensler understands, Bitcoin futures are, by definition, a derivative of the underlying Bitcoin spot market,” Emmer said.
In October, the SEC allowed trading to begin for two Bitcoin futures ETFs that provide exposure to CME-traded Bitcoin futures. While they say it’s a step in the right to provide people with a way to invest in Bitcoin, the Congressmen say these products are potentially volatile in contrast with a Bitcoin spot ETF. They may also impose higher fees on investors.
“Cryptocurrency has proven to be a driver of economic growth in our society,” Soto said. “Therefore, it is crucial for us to clearly regulate it in order to maximize the potential benefits and mitigate any risks. It’s important for us to come together to ensure that investors have consistency.”
The SEC has been hesitant to approve Bitcoin futures ETF and Bitcoin spot ETFs due to concerns about the spot markets potential for fraud and manipulation. But the SEC said these concerns could be alleviated if the underlying Bitcoin market is resistant to fraud and manipulation and a significant amount of trading happens on a regulated market.
The lawmakers point out that the Bitcoin futures ETFs that commenced trading in October are based on CME Bitcoin futures contracts, and the CFTC regulates the CME. Further, over 90 percent of the CME Bitcoin futures pricing comes from Coinbase, Kraken, and Bitstamp — three spot Bitcoin exchanges.
So, with the trading of Bitcoin futures ETFs based largely on three spot markets, the lawmakers asked in a letter to Gensler — what makes a Bitcoin spot ETF any different?
“American investors deserve consistency and choice. If the SEC cannot outline the perceived material difference in risk profiles, then they should allow ETFs based on spot Bitcoin to be traded. I look forward to Chairman Gensler’s response to our concerns,” Emmer added.