Reports are emerging that the U.S. Securities and Exchange Commission has rejected one, or possibly two, recent applications for Bitcoin exchange-traded funds, indicating that the regulator is not yet ready for more exotic futures products. .
About a day after Valkyrie applied for a leveraged Bitcoin futures ETF and Direxion applied for a reverse bear fund, the SEC appears to have vetoed both of them.
On October 28, Bloomberg's senior ETF analyst Eric Balchunas referred to an alert from Dow Jones stating that the SEC had shelved Valkyrie's leveraged fund. He added that the measure is likely to apply to the request for investment funds as well.
It looks like the SEC doesn't have it with leveraged (and probably inverse) Bitcoin futures ETFs. It can't hurt to try. Had they been through multi-billion dollar commercial vehicles in just a few years? via Dow Jones pic.twitter.com/MspMRf3hL9
- Eric Balchunas (@EricBalchunas) October 27, 2021
On October 26, ETF issuer Direxion applied for a Bitcoin Strategy Bear ETF that would allow speculators to buy futures that are short in price of BTC. On the same day, Valkyrie applied for a leveraged BTC futures ETF that would have offered 1.25x exposure to the asset.
The Direxion product invested purely in futures, however the Valkyrie product would have had futures, swaps, options and forwards. Another Dow Jones alert reported that the SEC only seems interested in direct futures products at this time, funds that buy contracts from the Chicago Mercantile Exchange (CME).
The regulator does not appear willing to approve any products that invest in the asset itself or anything other than CME futures contracts at this stage. Balchunas confirmed:
โIt would be interesting (and possible) if they let the reverse happen. That was limited to futures. Valkyrie's deviated a bit from that language. "
Related: Crypto Breaks the Wall Street ETF Barrier: A Turning Point or an Interim Solution?
ETF Store President Nate Geraci, reported that two more ETFs had been requested on October 27 from AXS Investments. The SEC filings are for a regular Bitcoin strategy ETF similar to the two already approved, and another short or inverse fund.
Another Dow Jones report claims that Grayscale is confident that the SEC will be ready to approve a spot Bitcoin ETF by July 2022.
On October 19, Grayscale filed an application with the SEC to turn your popular Bitcoin Trust (GBTC) into a spot fund which is backed by the asset itself as opposed to futures contracts.
Geraci, commented on the current lack of regulation on spot cryptocurrency markets, โSo cryptocurrency markets / exchanges will be regulated by then? It seems ambitious. "
In related news, VanEck is making final preparations for the launch of its Bitcoin strategy ETF, which will trade under the XBTF ticker. On Wednesday, Balchunas said there was a "good chance" that it could start trading on Friday, October 29, but possibly on Thursday.
