Recent Moves By SEC Pose Potentially Good News for Greater Global Acceptance and ETF User Adoption

The recent paradigm shift towards a more regulated and trustworthy environment by the Securities and Exchange Commission (SEC) lays an important foundation for retail users and institutions to wholeheartedly re-embrace the emerging era of digital assets and spark renewed interest in ETFs.   

 To comprehend what is driving this it is crucial to reassess the obstacles that have deterred users from entering the cryptocurrency space in the first place.   Principally, challenges such as trust issues, complexity, custody concerns, historical market frauds, and the absence of well-defined regulations have dissuaded a multitude of potential users. The elimination of these barriers today is poised to usher in a substantial influx of both retail and institutional investors into the cryptocurrency sphere. Over the past two years, there has been a noticeable purge of malevolent actors in the market, including notable figures such as SBF FTX, CZ Binance, 3 Arrow, Celsius, and few others. 

 To streamline this discourse, it is pertinent to examine the regulatory authorities capable of instilling confidence. Entities such as the SEC in the US or the Financial Conduct Authority (FCA) in the United Kingdom play a pivotal role in meticulously monitoring and regulating ETFs. These regulatory bodies meticulously review and approve ETF filings, ensuring strict adherence to pertinent laws and regulations. Moreover, they oversee disclosures, marketing materials, and the overall conduct of ETF managers.

In conjunction with the growing prominence of ETFs, additional technological advancements poised for introduction to the U.S. market encompass FinTech solutions meticulously designed to enhance simplicity and user-friendly automation through the integration of AI/ML. The paramount concern regarding trust and secure digital asset storage has catalyzed the development of technologies empowering users to retain their funds on their preferred exchanges. The synergy between FinTech solutions and licensed brokers facilitates remote connectivity to custodians, focusing exclusively on trading to maximize profitability without risking the movement or allocation of assets to unknown providers. This arrangement avoids direct digital asset transactions, permitting only licensed brokers to oversee retail accounts on their chosen custodian platforms. The amalgamation of these forthcoming solutions, ETFs, and a commitment to simplicity charts a trajectory for mass adoption in the foreseeable future. This approach is expected to significantly increase adoption among both institutional and retail participants in the cryptocurrency market. It is no secret that the cryptocurrency market is currently on the cusp of transformation, poised for significant growth in the coming years.

Insights from analysts at Bloomberg Intelligence reveal a substantial financial interest, approximately US$100 billion from traditional finance funds, awaiting deployment pending the approval of a Bitcoin Exchange-Traded Fund (ETF). This pronounced interest underscores the escalating institutional curiosity surrounding the cryptocurrency market. Notably, Galaxy Digital, a leading investment giant, recently convened a conference call that garnered the participation of approximately 300 financial service professionals. The primary focus of this meeting was the strategic allocation of capital to BTC, anticipating the highly awaited debut of a BTC ETF. The call served as a platform for in-depth discussions on the potential impact and benefits of incorporating BTC into investment portfolios. Participants in the call, distinguished financial professionals, articulated a consensus that BTC has metamorphosed into a focal point of interest within institutional circles. This heightened attention is attributed to the growing recognition of BTC's intrinsic value as a digital asset and its potential as a hedge against inflation and economic uncertainties. Bolstered by this mounting interest, industry insiders are increasingly optimistic about the prospect of regulatory approval by the SEC for a BTC ETF. Such an approval is anticipated to open new avenues for institutional participation in the cryptocurrency market, offering a more regulated and accessible channel for investment. This same approach is expected for ETH ETF and any others that may come down the road.

As of today, here is the list of firms with pending applications for bitcoin funds in the U.S.: BlackRock: On July 15, the SEC formally accepted BlackRock’s spot Bitcoin ETF application for review.   WisdomTree: WisdomTree refiled with the SEC on July 19. Valkyrie Investments: Valkyrie refiled its application on June 21. The ETF would refer to the Chicago Mercantile Exchange’s (CME) reference price for Bitcoin and trade on NYSE Arca, with Xapo as the crypto custodian. ARK Invest: ARK filed an application for its ARK 21Shares Bitcoin ETF in June 2021. ARK Invest has partnered with Swiss-based ETF provider 21Shares to offer the fund, and it will launch on the Chicago Board Options Exchange (Cboe) BZX Exchange under the ticker symbol ARKB if approved. VanEck: The firm filed a new application in July 2023. Fidelity/Wise Origin: Refiled for its Wise Origin Bitcoin Trust on July 19, 2023. Invesco Galaxy Bitcoin ETF: Invesco first filed an application for its Invesco Galaxy Bitcoin ETF jointly with Galaxy Digital on Sept. 22, 2021. The joint venture refiled its application in July. Bitwise: The manager refiled its application in August 2023. GlobalX: Refiled its application in August 2023.