In a letter sent to SEC Chairman Gary Gensler, two congressmen explain why a spot Bitcoin ETF should be approved in the US.
The president of the Securities and Exchange Commission (SEC), Gary Gensler, received a letter yesterday written by US Congressmen Tom Emmer and Darren Soto, in which they both advocate for the approval of an exchange-traded fund (ETF) of Bitcoin in cash (spot) to start operating in the country.
The market spot is the one in the that the value of the financial asset is paid in cash at the time of delivery.
“We wonder why, if you are comfortable allowing to trade in an ETF based on derivatives contracts, you are not equally or more comfortable allowing the trade to trade with Bitcoin-based cash ETFs “says the letter. “Bitcoin spot ETFs are based directly on the asset, which inherently provides more protection to investors.”
Emmer and Soto argue that investors They prefer spot ETFs because they can get direct exposure to the asset, unlike futures ETFs that are based on derivatives. They did a comparison to the gold spot and futures ETF market, which proves this claim. The SPDR Gold Trust ETF (GLD) Spot gold has traded more than $ 55.5 billion in the last 15 years, compared to just $ 50.4 million for the DB Gold Fund (DGL) gold futures ETF.
SEC shouldn’t worry
“We understand that previously the SEC decided not to approve a Bitcoin futures ETF or a Bitcoin spot ETF due to concerns about the perceived potential for fraud and manipulation in the Bitcoin markets.“Continues the letter and adds:
“In fact, the SEC made it clear that these concerns could be addressed by demonstrating… that the underlying Bitcoin market is inherently resistant to fraud and manipulation (or that there are other means to prevent fraudulent and manipulative acts and practices); or… that a significant amount of trading took place on a regulated market (for example, if the CME-traded Bitcoin futures market became the main source of price discovery in the Bitcoin market). Note that none of these requirements establish a preference for Bitcoin Spot ETFs or Bitcoin Futures ETFs. ”
Congressmen argue that the price index tracked by futures ETFs of Bitcoin, CME CF Bitcoin Reference Rate (BRR), you get 90.47% of your pricing data from the following exchanges from bitcoins: Coinbase, Kraken and Bitstamp. It does stand out that the concern of any fraud or manipulation in the market would also be transferred to the futures ETFs of Bitcoin and not just ETFs Bitcoin spot.
“For this reason, whether one, both, or neither of these requirements have been met, the SEC should no longer have concerns with Bitcoin spot ETFs and should show a similar provision to allow trading of Bitcoin spot ETFs. “says the letter.
Denied ETFs from Bitcoin spot
There have been many ETF applications for Bitcoin cash in the United States. However, since the SEC has denied or delayed all of them, Alternative spot investment vehicles have emerged Bitcoin, accumulating more than USD $ 40 billion in assets, according to the letter. As a result, some of these offerings are currently traded on over-the-counter (OTC) markets at values that naturally differ from their net asset value (NAV). These products have recently been traded at a steep discount to their NAV, according to congressmen.
“Allowing futures-based ETFs while continuing to deny spot ETFs would further perpetuate these discounts and clearly go against the SEC’s primary mission of protecting investors.” expresses the letter.
In the letter, the congressmen express that while they do not deny that it is a step forward that the SEC has approved the ETFs of BTC futures “for millions of Americans demanding access to easy ways to invest in Bitcoin, these products are potentially much more volatile than a spot Bitcoin ETF and they can impose substantially higher fees on investors due to the premium at which Bitcoin futures typically trade, as well as the cost of renewing futures contracts each month. “
The letter also states: Since the SEC is no longer concerned about Bitcoin futures ETFs (given that trading in these products has begun), presumably it has changed its mind on the underlying Bitcoin spot market because Bitcoin futures are by definition a derivative of the underlying Bitcoin spot market. For this reason, whether one, both, or neither of these requirements have been met, The SEC Should No Longer Have Issues With Bitcoin Spot ETFs“.
Finally it states: “To be clear, we do not mean to say that one method of exposure is better than the other, but rather that, unless there are clear and demonstrable benefits of investor protection, he must be able to choose which product is the most suitable for him and his investment objectives ”.
There have been many letters that different congressmen have sent to the SEC regarding Bitcoin One sent in August this year by Representatives Patrick McHenry and Glenn Thompson urged US regulatory agencies to establish a joint task force for cryptocurrency regulation.
Also in August, SEC Chairman Gary Gensler responded to an earlier letter from U.S. Sen. Elizabeth Warren, where she asked him what authority the SEC currently has. SEC to regulate crypto exchanges. He told her that Congress should give the agency additional oversight and enforcement capabilities to monitor “Transactions, products and platforms” in the US crypto sector.
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