The United States Securities and Exchange Commission (SEC) has proposed new rules for the approval of exchange-traded funds (ETFs) that makes it more likely that a Bitcoin ETF will soon become a reality. The proposed rules outline a plan that new ETFs can follow to streamline the approval process. This would eliminate the need for ETFs to get a special order from the SEC before they can operate.
Currently, there is USD 3.6 trillion in the United States ETF market, and if even a small fraction of this would be invested into a Bitcoin ETFs, it would cause a major price rally since the Bitcoin market cap is only USD 108 billion. BitMEX CEO Arthur Hayes thinks a Bitcoin ETF would cause Bitcoin’s price to go all the way up to USD 50,000, since a Bitcoin ETF would make investing in Bitcoin as easy as buying stocks. Currently, buying Bitcoin is a completely different process than buying stocks, but if the SEC approves a Bitcoin ETF then it can be bought on major institutional stock trading platforms. Likewise, cryptocurrency expert Michael Strutton says a Bitcoin ETF will drive Bitcoin’s price up to USD 35,000.
The SEC has asked for public comments in an announcement on 26 June 2018 on a Bitcoin ETF developed by SolidX and VanEck that, if approved, will be listed on the Chicago Board Options Exchange (CBOE). This ETF is one of the first to be backed by actual Bitcoins and was designed to address concerns from the SEC that caused previous applications to fail.
The SEC has reserved the right to put some ETF applications under greater scrutiny than outlined in this new proposal if the ETF is complex or leveraged. An ETF based on Bitcoin’s price that is backed by actual Bitcoins is fundamentally not complex and, therefore, Bitcoin ETFs should be able to follow the new streamlined process for approval.
It seems that a Bitcoin ETF is inevitable, it has become a question of when rather than if. Already, the SEC has warmed up to blockchain technology ETFs, and seven blockchain ETFs have been approved in 2018. Should a Bitcoin ETF finally get approved by the SEC in the United States, it will provide an easy avenue for institutional investment.
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