Gary Gensler, the current Chairman of the U.S. Securities and Exchange Commission (SEC), has been the focus of controversy due to his stance on Bitcoin Exchange-Traded Funds (ETFs). His opposition has rankled fund managers and industry hopefuls, prompting criticism and raising questions about the future of the cryptocurrency industry in the United States.
The crux of the matter centers on the type of Bitcoin ETF that Gensler is open to approving. A physically backed Bitcoin ETF, seen as the holy grail of Bitcoin investment vehicles, is regulated like a normal ETF under a 1933 law. However, Gensler has signaled that he would be more receptive to a Bitcoin futures ETF regulated under the stricter 1940 law governing mutual funds. This has led to dismay among some industry participants, who see futures-based funds as inferior products that have lagged in performance and proved more expensive than their physical counterparts.
The SEC’s reluctance to approve physically backed Bitcoin ETFs stems from concerns about market manipulation. Despite these concerns, Gensler’s openness to futures-based ETFs has puzzled some observers. James Seyffart, an ETF analyst at Bloomberg Intelligence, argues that if Bitcoin is indeed manipulated, Bitcoin futures would be affected by said manipulation of the underlying market, thus questioning the distinction made by Gensler.
Furthermore, recent feedback from the SEC has deemed applications for Bitcoin spot ETFs, filed by Nasdaq and Cboe on behalf of BlackRock and Fidelity, as inadequate. This decision has been based on concerns that the underlying spot market of Bitcoin is susceptible to fraud and manipulation. Despite these rejections, there is an understanding among some close to the applications that they do not necessarily indicate the products’ non-viability.
In a bid to assuage the SEC’s concerns about market manipulation, both Nasdaq and Cboe are partnering with Coinbase, the largest crypto exchange in the U.S., for surveillance programs. This move, however, has been met with silence from the SEC, which declined to comment on the possibility of individual filings.
Following the SEC’s feedback, it is expected that the exchanges will refile their applications, possibly with the inclusion of other reputable exchanges such as EDX, an institutionally focused brokerage. The SEC will then reexamine the applications, potentially raising more questions about the specifics of the surveillance agreements.
In conclusion, Gensler’s stance on Bitcoin ETFs has sparked a complex debate within the industry. While his position may initially appear to be an attempt to stifle the U.S. crypto industry, it can also be seen as a cautious approach to avoid potential market manipulation. The outcome of this debate could have significant implications for the future of the cryptocurrency industry in the United States.