By
Bena Ilyas
April 22nd, 2024
Two US lawmakers want to see spot Bitcoin ETFs included as an option for investors, instead of just futures-based options.
US lawmakers Tom Emmer and Darren Soto are petitioning the Securities and Exchange Commission to approve spot Bitcoin exchange-traded fund (ETFs). This is in light of the Commission’s decision to allow unleveraged exposure to BTC futures contracts in the US less than two weeks ago. In a letter to SEC Chair Gary Gensler on Wednesday, Emmer and Soto questioned the regulatory agency’s decision about ETFs. The Federal lawmakers are curious about the SEC greenlighting futures-based BTC ETFs, and not those that actually hold the token.
ProShares became the first company to successfully launch an ETF, dubbed ProShares Bitcoin Strategy, in the US – towards the end of last month. This further paved the way for other similar products to follow suit. However, the SEC has meticulously limited the variety of offers to futures-linked Bitcoin ETFs. In addition, shortly after approving ProShares’ filing, it notably rejected filings from Valkyrie and Direxion. The former was looking to launch a leveraged BTC futures ETF, while the latter had its sights set on an inverse fund for bears.
The Lawmakers Opine that Spot Bitcoin ETFs Are Relatively Safer than Futures-Based ETFs
In the submitted letter, the lawmakers questioned the practicality of running Bitcoin futures ETFs and not spot ETFs. They pointed out that the regulatory agency’s favored Bitcoin ETF choice is actually more volatile than Bitcoin spot ETFs. This would naturally pose more of a risk to investors – the very people the SEC says it is committed to protecting. Part of the statement on Bitcoin futures ETFs read:
“…these products are potentially much more volatile than a Bitcoin spot ETF and may impose substantially higher fees on investors due the premium at which Bitcoin futures typically trade, as well as the cost of rolling futures contracts each month”.
The letter continued to say:
“We question why, if you are comfortable allowing trading in an ETF based on derivatives contracts, you are not equally or more comfortable allowing trading to commence in ETFs based on spot Bitcoin”.
Finally, the letter concludes that the same metric used to approve futures ETFs is also applicable to spot ETFs.
The BTC ETF Filing Process
According to the rules governing ETF proposals, the SEC typically has up to 75 days to review fund applications. At the end of that timeline, if there are no objections from the SEC, the filing becomes effective. However, in certain instances, the regulatory agency can ask fund managers to withdraw their filings. The managers may also choose not to do so, opting to press on until the end of the period. Sometimes, this is to force a formal decision from the regulators.
According to Emmer and Soto’s, BTC spot ETFs offer more investor protection since they are based directly on the asset. The contents of the letter do not seem to take anyone by surprise, however. This is because both Representatives are advocates of digital currencies within Congress. Earlier in the year, they were among those who created legislation that would bring clarity on regulation around crypto tech.