The Securities and Exchange Commission (SEC) is still hesitant to approve the many applications to start a much-awaited bitcoin exchange-traded fund (ETF), and one major player in the space is calling on the SEC to give investors a choice.
David LaValle, managing director and global head of ETFs at Grayscale, said the SEC should allow investors to “choose their own exposure that meets their own investment needs and their own investment thesis.”
SEC Chairman Gary Gensler has expressed lukewarm enthusiasm for investment vehicles that provide exposure to crypto assets.
In August, he suggested he may be more willing to support the formation of products tied to bitcoin futures (contracts that bet on the future price of bitcoin), but fretted over what he sees as a lack of investor protection in the “Wild West” of crypto.
The SEC has so far rejected a number of ETF applications hoping to track the price of bitcoin itself (often referred to as a spot ETF product).
LaValle said he would prefer that the SEC give its blessing to both a bitcoin futures ETF product and a bitcoin spot ETF product at the same time.
“We think that the SEC should really take an equitable approach to allowing investors to choose which type of bitcoin exposure in the form of an ETF that they would like,” said LaValle at Yahoo Finance’s All Markets Summit Plus: Crypto Investing (an event sponsored by Grayscale) Monday.
'Glimmer of hope'
Grayscale currently offers investor exposure to bitcoin through its Grayscale Bitcoin Trust (GBTC). But private placement in the trust is only available to accredited investors, which is why LaValle hopes to convert the trust to an ETF — if regulators approve it.
“Bitcoin can be a little bit challenging for many investors to determine how to seek exposure or store it reliably and have a component of their investment portfolio in that asset class. I think the ETF opens up the pool to a much larger investment universe," LaValle said.
Davis Polk Capital Markets Group Partner Joseph Hall told Yahoo Finance that there may be reason to be optimistic about the SEC coming around to approving bitcoin ETFs.
Hall noted that the commission has turned down previous bitcoin ETF applications on the basis of market manipulation, mostly in markets abroad. One example: “wash trading,” in which a trader buys and sells a coin for the sole purpose of pumping volume and intentionally misleading the market.
But Hall pointed out that manipulation would have an impact on futures markets as well, which means that any support of a bitcoin futures ETF could show a “dwindling” emphasis on the rationale the commission has used historically to deny a bitcoin spot ETF.
“At least I would say there’s some glimmer of hope in the orientation that Chair Gensler seems to have here,” said Hall Monday in the same panel.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.