The Securities and Exchange Commission will next week approve the first US bitcoin futures exchange-traded funds, a major triumph for a cryptocurrency industry that has long sought approval from Wall Street’s top regulator.
The person said the SEC is unlikely to prohibit ProShares and Invesco’s ETFs, which are based on futures contracts and filed under mutual fund rules that SEC Chairman Gary Gensler believes protect investors well.
Due to the pending nature of the conversations, the source requested anonymity.
The SEC declined to comment when contacted by CNBC. Invesco and ProShares did not respond to requests for comment.
Bitcoin hit a new high of $60,000 on Friday, its highest since April 17, on hopes the SEC will approve the ETFs. The world’s most valuable cryptocurrency is up over 40% in just one month, approaching its early-year peak of $64,869 dollars.
The fund launch ends a years-long campaign by the almost $7 trillion ETF industry to persuade the SEC to investigate and sanction a bitcoin ETF.
But ProShares and Invesco funds will allow investors to indirectly buy bitcoin. The ETFs are based on bitcoin futures traded on the CME. The SEC will soon enable trading in bitcoin futures ETFs, according to Bloomberg News.
Others want a pure-play ETF backed by bitcoins, though no decision is likely for months. Investors argue direct funds avoid hefty costs of rolling into futures contracts that don’t sufficiently track bitcoin’s spot price.
The SEC claimed for a decade that crypto volatility and fraud made ETFs and other vehicles too risky to approve. Before joining the SEC, Gensler taught cryptocurrency seminars at MIT.
How to Protect Investors?
To protect investors, he and his team are working to properly regulate the thousands of new digital assets and coins, as well as the more well-known bitcoin and ether marketplaces.
Gensler stated last month that “we just do not have appropriate investor protection in crypto finance, issuance, trading or lending”. For now, it’s like the Wild West or the old ‘buyer beware’ era before the securities rules were written.
He also questioned if crypto assets can be protected from hackers and whether future ownership concerns will arise.
His work building expanding the Commodity Futures Trading Commission during the Obama administration was lauded by many dealers. Gensler helped design and implement a new supervision framework for the swaps market, which was previously unregulated.