(Reuters) — The going is getting powerful for U.S. corporations hoping to win the race to deliver a bitcoin exchange-traded fund to market.
Bitcoin’s 1,500 p.c surge final yr has stoked investor demand for any product with publicity to the red-hot asset. A number of corporations are jostling to launch exchange-traded funds which might open up the cryptocurrency to a broad retail market.
But regulators are asking powerful questions, and 5 fund managers this week shelved plans to launch ETFs primarily based on bitcoin futures, citing issues from the U.S. Securities and Exchanges Commission.
“We can count on the SEC to be more and more watchful over any corporations concerned in bitcoin exercise,” stated Marc Butler, a director at compliance administration agency Intelligize. “Investors must be warned. If it’s too good to be true, then it most likely is.”
The SEC has pending purposes for at the very least 14 completely different bitcoin ETFs or associated merchandise, regulatory filings present.
A handful of funds have been knocked again. The SEC in March denied a request to checklist an ETF from buyers Cameron and Tyler Winklevoss, homeowners of the Gemini bitcoin alternate.
The Winklevoss fund is in search of to put money into bitcoin straight. Other fund corporations staked their hopes on just lately launched U.S.-listed bitcoin futures contracts, which promised a extra secure base for ETFs than the largely unregulated digital foreign money spot market.
But on Monday, Rafferty Asset Management LLC, which manages the Direxion model and hopes to checklist leveraged funds that will double bitcoin’s each day value strikes, disclosed that the SEC was involved in regards to the “liquidity and valuation” of bitcoin futures contracts. It stated the regulator instructed it to withdraw its utility till it might handle these points.
On Tuesday, ProShare Capital Management LLC, Van Eck Associates Corp and First Trust Advisors LP stated in filings that SEC workers requested them to shelve plans for bitcoin ETFs.
Direxion, ProShares, VanEck and the SEC declined to remark. First Trust didn’t instantly reply to an electronic mail.
Bitcoin BTC=BTSP was final down 1.5 p.c at $14,779 on the Luxembourg-based Bitstamp alternate.
The race to launch bitcoin funds remains to be prone to cost ahead, analysts stated, as fund managers rush to handle the SEC’s issues and redesign their funds to placate the regulator.
“This is being pushed by retail demand,” stated Axel Merk, founder and chief funding officer of Merk Investments, which launched a bodily backed gold ETF in 2014. “If individuals are captivated with bitcoin, then individuals are going to attempt to market a bitcoin ETF.”
Merk stated he is aware of of a number of funds which have examined the criticisms of the previous filings and are decided to push by way of with their bitcoin ETF launches.
Some are additionally making an attempt oblique approaches that would present bitcoin publicity through extra conventional property.
Five fund managers, for example, have filed proposals for funds that will make investments primarily in shares with publicity to bitcoin or blockchain, the know-how used to file bitcoin transactions.
Thorny questions stay for funds that search to commerce in bitcoin futures, together with the extent of margin required to commerce futures and the potential for bitcoin futures to commerce at dramatically completely different costs than the cryptocurrency itself, in line with two individuals who didn’t wish to be recognized revealing discussions that they had with the SEC.
Regulatory issues didn’t cease the market from opening up by means of futures, although scrutiny of digital foreign money contracts now seems to be ramping up.
The U.S. Commodity Futures Trading Commission final month allowed CME Group Inc (CME.O) and CBOE Global Markets Inc (CBOE.O) to checklist bitcoin futures contracts, however just lately sought to overview its course of for itemizing digital foreign money futures.
Still, some suppose that, head-spinning volatility of bitcoin apart, U.S. capital markets threat lacking out on a burgeoning know-how if they’re too cautious.
“If the SEC doesn’t begin permitting merchandise, the capital markets right here within the United States will get left behind by these in Europe and Asia. That’s at all times a priority,” stated Trace Schmeltz, a accomplice at Barnes & Thornburg in Chicago.
This article sources info from VentureBeat