The U.S. SEC Hints At Further Delay In Bitcoin ETF Approval, Warns of Bitcoin Futures Exposure in Mutual Funds

Investors have been waiting eagerly on the sidelines for the approval of the first Bitcoin Exchange-traded-fund (ETF) in the U.S. However, on Tuesday, May 11, the U.S. Securities and Exchange Commission (SEC) hinted that it won’t be approving the Bitcoin ETF anytime soon citing the asset’s market volatility.

The staff statement published by the Division of Investment Management notes that Bitcoin is a “highly speculative” asset. Besides, the SEC also warned investors against the risks of mutual funds seeking exposure to Bitcoin futures.

Some of the top funds from financial giants like BlackRock and Morgan Stanley have been diversifying into BTC through such derivative products. This comes as major institutions have been seeking exposure to the world’s largest cryptocurrency.

In its note, the SEC mentioned: The staff among other things expect to … consider whether, in light of the experience of mutual funds investing in the Bitcoin futures market, the Bitcoin futures market could accommodate ETFs, which, unlike mutual funds, cannot prevent additional investor assets from coming into the ETF if the ETF becomes too large or dominant in the market, or if the liquidity in the market starts to wane”.

The SEC further added that Investor protection and assessing the ongoing compliance of these funds is a top priority for the staff”. The appointment of new SEC Chairman Gary Gensler had sparked some hope in investors looking at his affinity towards the crypto market.

Currently, there are around 10 Bitcoin ETF proposals submitted to the SEC of which the securities regulator is already reviewing four. The statement from the regulators notes: The staff welcomes further input from ETFs and other market participants, particularly input that focuses on efforts to ensure compliance with the Investment Company Act and its rules and promote investor protection”.

In a recent development, Gary Gensler has asked the U.S. Congress to develop a clear regulatory framework for the working of the crypto exchanges. Besides, speaking to CNBC last week, Gensler said Bitcoin has managed to attract many crypto traders, however, regulation is required for preventing fraud and other issues.

He added: It’s a digital, scarce store of value, but highly volatile. And there’s investors that want to trade that, and trade that for its volatility, in some cases just because it is lower correlation with other markets. I think that we need greater investor protection there.”