U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has outlined a plan for approving a Bitcoin exchange traded fund (ETF), a move that cryptocurrency proponents say is critical for making digital tokens mainstream.
Gensler said that an ETF that complies with the SEC’s strict rules for mutual funds could provide investors with necessary protections. Speaking in his first major speech on cryptocurrencies, Gensler also signaled an openness to an ETF focused exclusively on Bitcoin futures, which require investors to put down substantial margin to trade.
“Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to Bitcoin futures,” he said in remarks prepared for an upcoming appearance at the Aspen Security Forum.
The SEC has repeatedly refused to approve a cryptocurrency ETF, with the agency raising concerns over transparency and potential for manipulation in the Bitcoin cash market. In Canada, there are several cryptocurrency ETFs that track the price of Bitcoin and Ethereum.
Most pending ETF applications in the U.S. have been filed under 1930s laws that allow stock exchanges to list products. Gensler is hinting that he’d like to see a filing that seeks approval through a 1940 law that governs mutual funds.
The distinction isn’t just academic. The law for mutual funds has much stronger investor protections and requires funds’ boards to provide close oversight of the investments. The additional demands include a mandate that funds have independent boards and a restriction on affiliated people trading shares in the ETF.
Gensler’s ETF comments could add to a debate over whether cryptocurrencies are securities. That’s because some existing ETFs that track commodities or currencies aren’t regulated under mutual fund rules. Currently, U.S. officials classify Bitcoin as a “commodity.”
There are at least half a dozen Bitcoin ETF applications now before the SEC. In his speech, Gensler said that while he’s interested in Blockchain technology and sees potential value in cryptocurrencies, he plans to move aggressively to protect investors in the space.
“We just don’t have enough investor protection in crypto,” he said. “It’s more like the Wild West.”
