The launch of Bitcoin Futures ETFs excited the crypto people, but many remain convinced that the real turning point will be when the SEC approves ETFs based on spot Bitcoin.
That was discussed Thursday at the Financial Innovation Summit held by Bloomberg.
Michael Saylor: we need Bitcoin spot ETFs
The panel featured Microstrategy CEO Michael Saylor, who said Bitcoin will soon become more of a strategic asset:
“Bitcoin is property and not currency, you can hold it and it’s the standard by which all other properties will be judged. I read it as a green light for institutions and mainstream investors to own bitcoin in the western world. I think that this is the most significant thing it happened this year”.
That’s precisely why the CEO of Microstrategy believes Bitcoin spot ETFs are needed:
“To do that, you need the spot ETF. And once these spot ETFs roll, I think you’ll see billions, then tens of billions, then hundreds of billions, then trillions of dollars flow into them”.
Superior and inferior ETFs
Even for Nic Carter, general partner of Castle Island Ventures and co-founder of Coin Metrics, currently listed ETFs are “inferior” products compared to direct Bitcoin-based ETFs.
In his view, if the SEC approves this type of ETF, funds could attract $100 billion in investments in a month. After all, he explains, in Canada these kinds of instruments are already there and they work:
“They work just great. There’s no explanation for the reticence at the top levels here to approve this product, which obviously should exist and would make life immensely easier for all types of different investors”.
But then why does the SEC insist on not approving them? Nic Carter’s answer is simple:
“Ultimately, the motive is just simply suppressing the growth of Bitcoin”.
For Hester Pierce, the SEC commissioner also known as “crypto-mom” for her pro-cryptocurrency stances, the reasons are other:
“The reason is that the Bitcoin markets don’t look like our regulated securities markets,” she said at the summit Thursday. “The thing that regulators are most comfortable with is markets that look like our own”.
The differences between Bitcoin ETFs
The SEC-approved ETFs have Bitcoin Futures traded at the CME as their underlying. This is explained by SEC Chairman Gary Gensler, who, well before the approval of the ProShares ETF that debuted on the NYSE on October 19, said he preferred Futures-based ETFs because the futures market is regulated.
The ETFs discussed in the Bloomberg debate have physical Bitcoin as their underlying assets, not derivative contracts. But the SEC does not like this option because it considers the BTC market to be deregulated and susceptible to fraud and manipulation.
As noted by two deputies who wrote to the SEC chairman, Tom Emmer and Darren Soto, in reality even the Bitcoin futures market, although regulated, is still based on the exchange market. So the spot market and the futures market are extremely connected and exposed to the same dangers. This is why the SEC’s aversion to ETFs based on spot Bitcoin makes little sense.