Hopes for a U.S.-listed bitcoin ETF grew following a widely watched speech by the Securities and Exchange Commission Chair Gary Gensler on Tuesday, but the optimism was tempered by his forceful remarks on the need for more regulation in the crypto space.
As it pertains to ETF investors, the most notable comments to come from Gensler had to do with the potential for a U.S.-listed cryptocurrency ETF.
Gensler acknowledged that cryptocurrency investment vehicles already exist in the form of the $22 billion Grayscale Bitcoin Trust (GBTC), the newly launched Bitcoin Strategy ProFund (BTCFX) and others. But he also seemed to understand the strong desire for crypto ETFs, which have many advantages over existing products.
Bitcoin Futures ETF Favored
“I anticipate that there will be filings with regard to exchange-traded funds under the Investment Company Act (’40 Act),” Gensler said. “When combined with the other federal securities laws, the ’40 Act provides significant investor protections.”
He added: “Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures.”
The comments suggest that Gensler may prefer bitcoin futures-based ETFs over ETFs that would directly own bitcoin. If that’s the case, we may see a flood of new filings enter the pipeline soon. Currently, out of the dozen outstanding bitcoin ETF filings, only one is for a futures-based product.
Catalyst For Change
While important, Gensler’s comments on crypto ETFs were just a small part of a wide-ranging speech on the crypto industry that he gave at the Aspen Security Forum.
He made it clear he was approaching the space having extensively studied the technology behind blockchains, and that he saw a promising future for it:
“Before starting at the SEC, I had the honor of researching, writing and teaching about the intersection of finance and technology at the Massachusetts Institute of Technology. This included courses on crypto finance, blockchain technology and money.
“In that work, I came to believe that, though there was a lot of hype masquerading as reality in the crypto field, [bitcoin inventor] Nakamoto’s innovation is real,” Gensler added. “Further, it has been and could continue to be a catalyst for change in the fields of finance and money.”
Like ‘The Wild West‘
Though he was optimistic about the potential of crypto, he opined that most crypto assets, including bitcoin, were currently “highly speculative stores of value.”
That, according to Gensler, is completely fine—“good-faith actors have been speculating on the value of gold and silver for thousands of years”—but unlike the market for precious metals, crypto assets live in a world that is “more like the Wild West,” with fraud, scams, abuse, hype and spin widespread in the asset class.