Asset manager, crypto index fund & ETF provider Bitwise Tweeted three main reasons why “ETF approval matters.”
Although not the first to apply for an ETF with the US Securities and Exchange Commission, BlackRock’s Bitcoin spot ETF application sparked a nationwide conversation regarding the future of ETFs in the crypto world.
Following BlackRock’s announcement, Bitcoin saw a sharp $4,000 surge in price. But, more importantly, several financial institutions immediately followed suit by applying for similar ETFs with the regulating body.
However, the SEC has been fairly adamant about not providing a seamless application process.
Grayscale, a digital asset manager who already managed a Bitcoin Trust Fund, was the first to submit an ETF application. With such a trust already approved, it was expected that the SEC would approve its natural evolution, a spot ETF.
Not only has the SEC refused Grayscale’s request but also deliberately took more than the necessary time to respond to the application, which prompted Grayscale to file a lawsuit against the regulating body.
The SEC cited concerns regarding market manipulation and transparency as reasons to not approve ETF applications filed by Wall Street behemoths.
As a response, BlackRock and Co. refilled for its ETFs, this time including Coinbase, a US-based crypto exchange as a surveillance partner, in hopes of overcoming the SEC’s posed anti-money laundering hurdle.
US markets regulator has yet to approve any spot ETF applications including Cathie Wood’s Ark Invest’s one which was expected to be first in line for approval. Wood herself said to expect the SEC to approve several ETFs, including her own company’s, in one go.
Bitwise breaks down its perspective on the potential for ETFs in the digital asset market by pointing out the benefits investors may reap should they receive approval.
About the first point: ETFs provide an easier route for investors to access crypto investments. The idea is to give investors a way to enter the market without the need to buy tokens separately and manage wallets on their own.
Moreover, tokens such as Bitcoin come with a hefty entry price. Priced at ~$26,000 at the time of publishing, Bitcoin tokens are likely to be beyond the budget of many small-time investors.
Secondly, as asset managers enter the market, crypto investors naturally anticipate a surge in liquidity, which will enhance existing investments and also indicate a more stable future for digital assets.
Thirdly, Wall Street currently holds the position of the leading exchange in the US. Obtaining the stamp of approval from such a prestigious institution lends legitimacy to digital assets, which, in turn, is likely to attract a greater number of investors to the space. This heightened interest enhances the potential for a more prosperous digital economy.