Eight years later, the US Securities and Exchange Commission (SEC) tacit approval of a Bitcoin Exchange Trading Fund (ETF) last week sparked a crypto glut and sent the price of a digital key. Currency to an all-new high.

While some analysts and industry participants question the nature of the approved product – the ProShares Bitcoin Strategy ETF (BITO) and Valkyrie Bitcoin Strategy ETF (BTF) rely on futures rather than tracking the spot Bitcoin price – the development was considered hugely revolutionary. A moment in the history of cryptocurrency.

Before BITO’s big launch on the New York Stock Exchange, it wasn’t clear how much interest the new offerings would generate. On the first day of BITO, trading exceeded even the most optimistic forecast as the new ETF hit a record volume. Meanwhile, the price of BTF fell slightly on the first day.

As enthusiastic as the crypto audience is, the question remains: Why is this happening now?

Years of organizational resistance
The ETF approval is a turning point for the industry. In a written statement to Cointelegraph, the president of the Bitcoin Foundation, Brock Pierce, said: “This is a welcome moment as many entrepreneurs and companies have been seeking regulatory approval since 2013.”

Since the Winklevoss brothers first requested regulatory approval for a Bitcoin ETF eight years ago, the Securities and Exchange Commission (SEC) has been in the habit of either rejecting or deferring decisions on several proposed Bitcoin ETFs.

The Securities and Exchange Commission has long argued that the market underlying the offered instruments is nothing more than a minefield for unsuspecting traders. The regulator’s main concerns included potential bitcoin price manipulation, insufficient liquidity, cybersecurity concerns, and a lack of transparency regarding the trading data required to price the asset.

In early April, the head of the Securities and Exchange Commission, Gary Gensler, first suggested that it could be open to an ETF that tracks the price of regulated bitcoin futures rather than pegging it to a real asset, leading to a new round of proposals. According to Gensler, access to BTC futures contracts, especially those regulated by the Investment Corporation Act of 1940, provides dual protections for investors, which can be considered appropriate according to agency standards.

At the end of September, while speaking at the Future of Asset Management conference, Gensler doubled down on the possibility of a product being traded on the Bitcoin futures exchange, suggesting that previous comments expressed a carefully balanced stance rather than an odd change in terminology.

In fact, the futures-based model solves many of the investor protection issues that the SEC faces in relation to physical Bitcoin products. Since investors are often betting on whether the price of BTC will go up or down, they do not need to touch the real cryptocurrency, and an ETF provider is not required to store bitcoins, removing a significant source of trouble from regulators.

In addition, Bitcoin futures contracts, which are controlled by the Commodity Futures Trading Commission (CFTC), have been offered on the Chicago Mercantile Exchange since 2017. It is an instrument with a proven track record that is well documented and well understood by financial regulators.

why now?
Gary Gensler, whose nomination for the lead role of securities regulator in April 2021 was greeted with enthusiasm by most of the crypto community, quickly proved that he has a much more complex relationship with the digital asset space. In particular, his tireless pursuit of classifying most cryptocurrencies as securities and regulating them as such has led many in the industry to expel him from the list of cryptocurrencies.

Meanwhile, as someone who undoubtedly knows a thing or two about cryptocurrency and its potential, it is possible that the head of the Securities and Exchange Commission (SEC) does not want to establish himself as the number one villain in the cryptocurrency industry. Allowing futures-based ETFs to finally emerge can be seen as the safest and cleanest way to give the sector something that sounds like a big win.

On this topic: Cryptocurrency Breaks Wall Street ETF Barrier: Split Point or Pause?

Brad Yasser, founder and CEO of the decentralized financial platform EQIFI, sees two important logical moments, that October 2021 was the time when the SEC finally lifted the lock on the Bitcoin ETF. The first is institutional inertia, in which it takes a long time for the regulatory mechanism to respond to demand for a new class of products, even when it is clearly time. Yasar told Cointelegraph:

“The system went through its cycles and eventually reached a state where approval was possible. It also doesn’t hurt that more government entities now have large amounts of bitcoin in their accounts and quarterly.

Source: CoinTelegraph

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