Congress To Continue Overseeing SEC On Bitcoin, Crypto Spot ETFs

The first physically delivered Bitcoin exchange-traded fund, which may be in the offing following the recent Securities Exchange Commission’s reply to a letter from Congressmen Tom Emmer and Darren Soto, may light up crypto markets once again after the recent corrections that have left many baffled on where the crypto market is headed.

Despite there being many Bitcoin ETFs so far, all of them are not physically delivered meaning no actual Bitcoin is traded during execution of these contracts. And it appears these derivatives products are doing little to hold crypto prices up and out of huge volatility. Although the derivative products have boosted BTC interest among corporates and institutions, crypto spot markets remain depressed.      

For instance, within weeks of the ProShares ETF launching in the United States last October, crypto prices went to the rooftop. But after about a month, crypto prices were headed south in a big way – since then, BTC price has tumbled by close to 50%. So the second Bitcoin ETF was never a second helping for crypto enthusiasts despite the huge enthusiasm around ETFs. 

In fact, Bitcoin has been struggling to penetrate and retain the $50,000 price mark since November last year. Despite the many reasons given for it, demand, especially among institutional investors, still remains a huge factor. A spot ETF is a more preferable ETF option for most crypto enthusiasts since it ties in the demand for these futures contracts directly with Bitcoin spot demand. Launching of the first spot ETF in the United States could, therefore, see a huge demand and price boost for Bitcoin beyond the $50,000 mark. 

On Thursday last week, Congressman Tom Emmer – who is advocating for a spot Bitcoin ETF, said that SEC had replied to their earlier letter on the matter. Essentially the reply means the SEC was aware and would consider the concerns in the letter. According to the reply letter from SEC, which Emmer shared on Twitter, SEC said it would consider all the concerns in the letter by Soto and Emmer when reviewing Bitcoin spot ETF applications. This has led to speculation that there could be further renewed interest by the SEC to approve the first Bitcoin spot ETF in the US. 

The November letter from the two congressmen questioned SEC’s move to allow only derivative Bitcoin ETFs and not a spot ETF, adding that SEC’s approach towards crypto regulation was unacceptable. The two said in the letter that SEC should also allow spot BTC products given it no longer has security and fraud concerns with the already launched BTC derivative ETFs whose prices also derive from Bitcoin spot markets. The two argued in the letter that any fraud and manipulation on BTC that could affect a spot BTC ETF would also affect the derivative ETF products.  

They argued that some products that worked like spot BTC ETFs had already been licensed by SEC and were operating through over-the-counter trading desks at crypto exchanges. However, their prices do not match up with the net asset value as these products are not registered as spot ETFs for BTC.