What Happens When The USA Finally Introduces A Bitcoin ETF

In one of our recent reports, we highlighted the growing optimism that a cryptocurrency ETF might be approved by the US SEC this year based on the sentiments expressed by SEC commissioner and crypto enthusiast, Hester Pierce, who said the cryptocurrency industry was being treated unfairly and being judged by a higher benchmark than traditional markets in the issue of ETFs.

More recently, during her live session at the B-Word conference last month, she again expressed her displeasure with the current situation in which the SEC was yet to approve any Bitcoin ETF in the US saying “I would never have imagined that I would be in this situation where we would not yet have approved one and other countries are moving ahead.”

While the community is still hopeful of getting approval of at least one of the ETF applications sitting with the SEC, with just four months left in 2021, those hopes seem to be weakening.

Currently, there are at least 12 Bitcoin ETF applications sitting with the SEC and several Ethereum ETF applications too. The first, VanEck Bitcoin trust, was filed in March 2021 by a global investment management firm, VanEck. The firm has had several of its Bitcoin ETF applications rejected over the years. Its current application which the SEC is yet to decide on but is formally reviewing is one of the strong contenders to receive approval.

Others include Valkyrie Bitcoin Trust, NYDIG Bitcoin Trust, WisdomTree Bitcoin Trust, First Trust SkyBridge Bitcoin ETF Trust, and Wise Origin Bitcoin Trust. Notably, as of May, 5 of the ETF applications had had 19b-4 forms – a form that makes the SEC bound to weigh in on their decision or extend the review period within 45 days – filed on their behalf. So far, the SEC has been extending the decision citing that it needs time to get public opinion and weigh the risks and benefits for consumers.

Other countries, notably Canada and Brazil, already have several Bitcoin and Ethereum ETFs trading on their exchanges and have reported that the funds are thriving in the markets. 

Pierre’s B-Word statement also gave the SEC a tongue lashing, stating that the regulatory body was not a merits regulator but was to regulate in line with the wishes of the people.

Significantly, SEC chair Gary Gensler, whose appointment raised hopes in the crypto community as he was considered to be a Bitcoin supporter has turned out to not be so enthusiastic so far. The recently released SEC agenda of things they were focusing on for 2021 did not include cryptocurrencies as a significant item. 

However, despite the development not being what was expected, the community is still hopeful. Even if approval does not materialize in 2021, the next year will only likely bring the day of an approval closer. With growing interest and adoption, the number of applications will also grow thereby mounting pressure on the SEC to make a decision soon enough.