According to many, regulatory barriers have remained a hindrance to the evolution of the crypto-space. The need for a crypto-ETF, especially in the United States, is a long-held belief for some. However, the country’s SEC has repeatedly deferred the listing of such funds on Wall Street due to manipulation concerns.
Not every regulator in the country shares this opinion though.
Not all regulators
In a recent interview, Commodity Futures Trading Commission (CFTC) Commissioner Brian Quintez expressed his support for the approval of a crypto-ETF product. According to Quintez, such a product can greatly increase adoption by doubtful big-ticket investors and companies. He added,
“I do think that an ETF product on a crypto-asset solves for a lot of institutional hesitancy where there is probably demand and it gets to the accounting treatment of this.”
Here, the Bitcoin accounting issue cited by the regulator refers to the fact that Bitcoin investments are currently reflected as intangible assets on a company’s balance sheets. This gives companies no real incentive to deviate extensive funds towards the digital asset from an income statement perspective.
Moreover, these assets are regularly tested for impairment, which turns out to be negative if they trade below the purchase price. This is a regular scenario for crypto-markets that are prone to high volatility. This also has the side-effect of deferring investors from trusting the assets. Quintez further elaborated,
“If you gain that exposure through an ETF, it becomes a security which is marked to market in real-time and you don’t have to worry about the custody issues. So, there are broad implications for this and I hear about demand all the time and given that it is a commodity on which Future contracts are already listed, I can’t understand but also nor speak to the hesitancy at our sister agency.”
CFTC’s precedent
The Commissioner also touched upon the CFTC’s own approval of BTC Futures listing in 2017 as an example. In the said case, the CFTC did not focus on value judgments like if they are an appropriate investment tool. Instead, the agency worked towards fixing the susceptibility of the index for market manipulation.
Ergo, the concluded listings didn’t include any value judgments and were technologically neutral. They also allowed for the conviction of possible manipulators, he added.
While Bitcoin and Ether ETFs have been approved in countries like Canada and Brazil, dozens of such applications to the SEC remain pending. Curiously, in a recent speech, SEC Chair Gary Gensler hinted at the approval of a BTC ETF in the U.S. However, this would come with a strict list of rules that would only consider ETFs focused exclusively on Bitcoin Futures.
