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Stock market fund managers who want to take advantage of the frantic trade around cryptocurrencies are preparing for a longer-than-expected regulatory scrutiny after comments from Gary Gensler, chairman of the Securities and Exchange Commission, dampened hopes. a quick approval of bitcoin ETFs this year.
Speaking to the House Financial Services Subcommittee last week, Gensler said “there are many challenges and gaps for investor protection in [crypto] markets ”. He added that “none of the exchanges that market cryptographic tokens has yet been registered as an exchange with the SEC.”
It was not the first time the SEC president has expressed his concerns lax supervision, and its stance tells industry experts that the agency wants to try to pull cryptocurrencies harder under its regulatory authority before approving a list of a few dozen bitcoin ETF applications from Fidelity, WisdomTree, Wilshire Phoenix, VanEck and First Trust SkyBridge. Joining the waiting game are a small but growing amount of etherum ETFs, following requests for SEC approval by VanEck and WisdomTree in May.
The SEC rejected some previous Bitcoin ETF applications and recently delayed one decision over another: its resolution on VanEck’s filing will now arrive in June at the earliest, the agency said on Aug. 28. April, hours before an earlier deadline.
“I hope [delay] “Honestly, that happens with all of our presentations,” said Laura Morrison, Cboe’s global head of listings, which many of the cryptocurrency ETFs have chosen as an exchange.
Cryptography enthusiasts were originally encouraged by Gensler’s quote, as he had taught classes on blockchain technology at the Massachusetts Institute of Technology while out of government, but recently called for “greater investor protection” specifically in bitcoin. . The investment management division at the SEC also issued a warning to investors about the risks of the cryptocurrency market.
Both shares cooled optimism in the $ 2 million asset class, largely unregulated. Although the Commodity Futures Trading Commission regulates cryptocurrency futures, spot trades like Coinbase or Kraken have less oversight.
“[Gensler] wants to see regulation there, and if that happens, it looks like it would be what the SEC needs to approve a bitcoin ETF, “said Craig Salm, Grayscale’s vice president of law, who runs a trusted bitcoin trade in addition to -Markets without prescription.
An executive in a fund management group analyzing investment in cryptography said Gensler would likely look at the bitcoin ETF approval process as a way to gain more oversight and regulation of cryptocurrencies in general.
Gensler’s caution is shared on Capitol Hill, where senior lawmakers, such as Democratic Senators Sherrod Brown and Elizabeth Warren, have said the SEC should to take care before approving cryptocurrency ETFs.
Still, some fund managers remain optimistic.
“We have a‘ half-glass ’view of the state of cryptocurrency regulations,” said Jan van Eck, chief executive of VanEck. “Those who oppose a bitcoin ETF are forcing investors to lower fund structures and less regulated places.”
The backlog of cryptocurrency ETF approvals has not stopped the demand from investors for exposure to bitcoin through various intermediary servers in the market. These include the grayscale trust and shares of MicroStrategy, a software company that owns about $ 4.5 billion in cryptocurrency, as well as Bitwise’s Crypto Industry Innovators ETF, which owns companies like Coinbase. This growing market for bitcoin exposure is expanding in the absence of formal approval of ETFs.
The fate of bitcoin ETF applications depends on whether the SEC believes they include adequate protections for investors who have cryptocurrency prices are volatile and is considered vulnerable to fraud and manipulation.
“Given the recent comment from SEC and presidency staff, it’s reasonable to think that asset managers are trying to convince the regulator that their proposed funds will cover risks for investors,” said Todd Rosenbluth, head of CFRA mutual fund and ETF research.
“The regulatory approval process for a U.S. bitcoin ETF seems focused on whether they are comfortable with the risks associated with bitcoin in a fund and whether the fund could become too large to handle the lack of liquidity in the market.” .
Fund providers are working on their ETF encryption applications to meet regulatory concerns. Bitwise, which originally applied for regulatory approval of a bitcoin ETF in 2019 before withdrawing the application after an initial rejection, has been reviewing its filing for more than a year.
“We’ve been working on a variety of ways to show that the market has matured enough to meet staff concerns,” said Matt Hougan, its investment director.
Regulators in other countries have approved bitcoin ETFs, triggering more than a billion dollars in global inflows. Canada’s Purpose Bitcoin ETF, which began trading in February, rose to more than $ 1 billion in assets under management in less than two months. In Europe, several listed products are listed in Germany and Switzerland.
It is not uncommon for US regulators to spend years approving new ETFs. Still, the cryptographic crowd has been frustrated by the lengthy process.
“Crypto lives in dog years,” Hougan said of Bitwise. “A week in the crypto market is like a year in the capital markets.”
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