On October 19, 2021, the first U.S. Bitcoin-focused exchange-traded fund ("ETF") will begin trading with approval from the Securities & Exchange Commission ("SEC"). The newly launched Bitcoin ETF is being issued by ProShares and tracks the Bitcoin futures market. With three other Bitcoin futures ETFs expected to launch later this month, ProShares will be the first of the Bitcoin ETFs to trade. ProShares and other issuers have been trying for years to get Bitcoin ETFs traded on U.S. exchanges and until now had been unsuccessful in their applications to regulators.
Prior to granting its approval, the SEC had explicitly rejected Bitcoin-focused ETFs because of what the Commission viewed as the immaturity of the industry and its potential to be subjected to market manipulation. However, in August 2021, SEC Chairman Gary Gensler made remarks signaling he would be open to approving Bitcoin futures ETFs. Chair Gensler offered that such ETFs offered stronger investor protections because they would be subject to regulation under the Investment Company Act of 1940. Perhaps as a result of those comments, recent months saw an increase of applications of Bitcoin futures ETFs, as opposed to ETFs linked to the spot market for Bitcoin, culminating in approval for ProShares' launch on Tuesday, October 19. This is a significant step for the crypto-focused investment industry, and we anticipate more to come.
DISCLAIMER: This article was originally published by McGonigle PC prior to their combination with Davis Wright Tremaine LLP. The article is published here with permission.