79 total views
“Investors should have a choice over which product is most fit for them,” the bipartisan congressional tag team argues.
Representatives Tom Emmer (R-MN) and Darren Soto (D-FL), two of the most active leaders of the Congressional Blockchain Caucus, wrote to Securities and Exchange Commission Chairman Gary Gensler today about a topic that is on everyone’s mind when it comes to cryptocurrency.
Their question: Why don’t we have a?
“We question why, if you are comfortable allowing trading in an ETF based on derivatives contracts, you are not equally or more comfortable allowing trading to commence in ETFs based on spot Bitcoin,” the congressmen wrote. “Bitcoin spot ETFs are based directly on the asset, which inherently provides more protection for investors.”
ETFs are investment products that track the price of an asset or assets. Retail investors can integrate ETFs into their retirement and savings portfolios to get price exposure to different stocks and bonds. A Bitcoin ETF would allow people who don’t want to buy and storethemselves to still get in on the action; instead of buying BTC on a cryptocurrency exchange, they could buy and trade it on a stock exchange.
But Bitcoin futures ETFs aren’t that. They track the price of investment contracts that speculate on the coming price of BTC. All in all, a more complicated venture for average Americans—and one that Emmer and Soto believe can be more volatile and costly.
Nonetheless, last month, the SEC, which has for years rejected applications for a Bitcoin ETF, stepped aside to allow trading of Bitcoin futures ETFs. Gensler had indicated in August that he was hoping to see such applications, which would fall under the Investment Company Act of 1940. “When combined with the other federal securities laws,” Gensler claimed in the August speech that set off the mad dash of crypto futures ETF filings, “the ’40 Act provides significant investor protections.”
That move was ostensibly made due to the possibility of Bitcoin spot prices being manipulated or prone to fraud. However, as Emmer and Soto point out, any fraud or manipulation in spot markets would invariably spill over into Bitcoin futures. “The spot Bitcoin exchanges: Coinbase, Kraken, and Bitstamp make up 90.47 percent of the pricing of the CME CF Bitcoin Reference Rate (BRR), which is the pricing index that CME futures-based ETFs use,” the reps said. They believe that if the spot markets are bad, the derivatives markets will be bad as well.
The lawmakers stress they aren’t choosing sides; they simply don’t believe Gensler’s claim that derivatives are safer. They concluded that “unless there are clear and demonstrable investor protection advantages, investors should have a choice over which product is most suitable for them and their investment objectives.”