Blow to Bitcoin ETFs as Two Funds withdraw Applications
In what is another blow to many investors who wanted to the opportunity to trade digital currencies with Exchange Traded Funds (ETFs), two fund providers have decided to withdraw their applications.
Intercontinental Exchange wanted to launch the Grayscale Investments Bitcoin Investment Trust (GBTC) but withdrew its application when it started to face some resistance from the SEC.
Similarly, Van Eck Associates withdrew their registration request. This was done because the SEC concluded that the fund could not be considered until Bitcoin futures actually began to trade on the exchanges.
Adaptions in Regulation
Grayscale did acknowledge that there had been a great deal of changes to regulations around digital currencies. Yet, they did not think that there has been enough change in the environment to warrant an ETF. In the statement they said
Although digital currency market regulation continues to rapidly evolve, at this time Grayscale does not believe there have been enough regulatory developments to prompt the SEC to approve the ... application,
They did however say that they would continue to work with the SEC on an ongoing basis so that one day they could eventually approach the topic again. The current form of the Bitcoin Investment Trust is an OTC (Over the Counter) instrument. This means that is traded on many more informal exchanges than on the more common equity exchanges.
The announcement led to a fall in the price of the ETFs had fallen by about 3.2% to $715. Given that the instrument is an OTC one, it commands a considerable premium over the Net Asset Value of the Bitcoins it holds ($386 per share)
Outstanding SEC Applications
Although this may seem like a setback, there are still some ETF firms that have applications with the SEC for Bitcoin and cryptocurrency funds. One such firm is Proshares which is an alternative asset ETF provider. They have applied to list two Bitcoin ETFs which will also make use of futures instruments in order to track the price of it.
Even if the SEC decides to take a rather hard line with Bitcoin ETFs in the US, there are other countries which may be more receptive. For example, it was recently reported that Evolve funds was preparing a Bitcoin ETF application for the Canadian regulators. They hope to call the ETF "BITS" and it will also obtain its value from investing in futures on the CFE Bitcoin Exchange.
As firms try to jostle for the opportunity to be the first provider to list a Bitcoin ETF, one thing is for certain. The stamp of approval that a regulated ETF will provide will increase liquidity and reduce the large scale volatility that is present with Bitcoin.
Featured Image via Fotolia
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.