‘Zero chance’ of US approving spot bitcoin ETF in 2022 – VanEck

Issuer that had crypto ETF rejected by SEC says nothing will happen until regulators finish turf war

There is “probably zero chance” of the US Securities and Exchange Commission (SEC) allowing an asset manager to issue an exchange-traded fund (ETF) that tracks the price of bitcoin this year, according to one of the companies that has had an application to run a crypto fund rejected by the regulator.

American investors will have to wait until at least 2023 for a spot bitcoin ETF because the SEC is fighting the Commodity Futures Trading Commission (CFTC) for the right to regulate cryptocurrencies, said Gabor Gurbacs, the director of digital assets at VanEck.

“The SEC wants jurisdiction over the spot markets and they’re literally having a legal battle with the CFTC over who has jurisdiction,” he said at Risk.net’s Cryptocurrency Trading Forum on May 4. “Once that concludes, we’ll have ETFs, and by that time we’ll have 80–100 countries with ETFs.”

The SEC rejected the VanEck Bitcoin Trust, an ETF that would have invested in spot bitcoin, last November. The regulator has since blocked every application to list a spot bitcoin ETF, even though similar funds have been approved by regulators in markets including the European Union, Canada and Brazil.

VanEck listed an exchange-traded note (ETN) that invests in spot bitcoin at the end of 2020 in Switzerland. EU regulations prevent asset managers from issuing ETFs that invest in a single security or commodity. A fund listed on a stock exchange tracking a single security has to be structured as an ETN or an exchange-traded product.

“Already 30 countries around the world have ETFs trading and probably another 50 have access to ETFs through Europe,” Gurbacs said.

The SEC has allowed asset managers to issue ETFs that track bitcoin futures listed on the Chicago Mercantile Exchange since late last year. The funds have proven unpopular because their high fees and the cost of rolling over monthly futures contracts have been a drag on investment performance. The ProShares Bitcoin Strategy ETF, for example, loses 9% a year to fees and rolling futures contracts.

VanEck’s Bitcoin Strategy ETF is currently trading on the Cboe. It uses the futures market to mimic the movements of the biggest digital currency.

Jason Zins, a partner at Skybridge Capital, which also applied to issue a spot bitcoin ETF, told the conference that he was “a little more optimistic” about the prospects for bitcoin ETFs gaining regulatory approval.

“We think there is a decent shot in the next 12 months” of getting regulatory approval for spot bitcoin ETFs in the US, said Sebastian Bea, president of One River Digital, who was also speaking at the Risk.net event.

“I don’t think it’s 100%, but I definitely don’t think it’s zero any more,” Bea added. “The administration rushing to get an executive order out, in the midst of a war in Europe, tells you there is a bit of a regulatory competition happening country to country, and that is constructive for this industry”.

Crypto winter

Speaking on the same panel, Apollo Global Management partner Christine Moy said cryptocurrency business should be preparing for the onset of another “crypto winter”.

“I’m not saying that we are going into one or we are already in one, but I think you’ve seen these large crypto companies raise these huge war chests because they know that is just crypto life,” she added.

“It gets super frothy and exciting and there’s a crypto conference every week on the beach and it’s amazing, and then there are some years where price action does nothing, and everything kind of fizzles out,” she said, noting that the last crypto winter between 2018 and 2020 was a good time for Wall Street firms to recruit digital asset expertise.

Moy worked at JP Morgan for 18 years, where she was global head of blockchain and crypto, before joining Apollo in April.

She said that ‘crypto winter’ “is actually from an investor perspective and from a builder perspective the best time because then all the opportunists that weren’t really committed to the space are out”.

“Everybody who is still in the space building ends up becoming the biggest companies in the next cycle,” she said. “It will ebb and flow, but it’s clear that it is not going back in the box.”

Editing by Will Hadfield

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