SEC Will Not Review ETFs Based on Exchange Traded Bitcoin Derivatives Until They Exist

The U.S. Securities and Exchange Commission (SEC) has told leading gold fund management firm VanEck that it will not review the firm’s registration statement for a Bitcoin ETF. The “VanEck Vectors Bitcoin Strategy ETF” seeks to invest in U.S. exchange-traded bitcoin derivative products, which are currently unavailable. In response to the SEC’s request, the firm withdrew its application.

Also read: Russian Regulators Disagree on Crypto Regulation, Postpone to Next Year

SEC’s Policy

Leading gold fund management firm VanEck filed with the SEC last month to list and trade the “VanEck Vectors Bitcoin Strategy ETF.” The fund does not plan to invest in bitcoin directly but will invest up to 25% of its portfolio in U.S. exchange-traded bitcoin derivative instruments.

On Wednesday, the SEC published a letter by Matthew Babinsky, Assistant General Counsel at VanEck, requesting the “withdrawal of Post-Effective Amendment No. 2,562,” which is the registration statement for the VenEck Vectors Bitcoin Strategy ETF. The letter read:

On a call with the [SEC] staff on September 20, 2017, the staff expressed the view that it is the Commission’s policy to not review a registration statement for a fund where the underlying instruments in which the fund intends to primarily invest are not yet available.

No U.S. Exchange-Traded Bitcoin Derivatives

Currently, there are no U.S. exchange-traded bitcoin derivative products on the market.

A derivative trading platform and clearinghouse LedgerX was approved by the U.S. Commodity Futures Trading Commission (CFTC) in July. The company is planning to launch “physically-settled” bitcoin derivative products by this year.

In addition, the Chicago Board Options Exchange (CBOE), the largest U.S. options exchange, plans to offer cash-settled bitcoin futures in the fourth quarter of 2017 or early 2018.

While there are no U.S. exchange-traded bitcoin derivative products, a few traditional fund managers have already filed with the SEC to list and trade Bitcoin ETFs based on these instruments. VanEck Vectors Bitcoin Strategy ETF is among them. Last month, Rex Shares LLC filed registration statements for two Bitcoin ETFs; the Rex Bitcoin Strategy ETF and the Rex Short Bitcoin Strategy ETF. Another filing was made last Wednesday by Proshare Capital Management LLC with the Commission to offer both Proshares Bitcoin ETF and Proshares Short Bitcoin ETF.

SEC’s Request

Babinsky’s letter also stated that:

The [SEC] staff requested that the Trust withdraw the Amendment until such time as the underlying instruments in which the fund intends to primarily invest (i.e., bitcoin futures contracts) become available for investment. In response to the staff’s request, we are requesting withdrawal of the Amendment.

Moreover, recently reported on the world’s leading derivatives marketplace CME Group deciding not to follow through with their original plans to list and trade bitcoin futures.

What do you think of the SEC’s action? Let us know in the comments below. 

Images via Shutterstock, VanEck, LedgerX, and CBOE.

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