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SEC Is Contemplating ETFs

Samantha Mitchell

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United States Securities and Exchange Commission

Background On SEC

The United States Securities and Exchange Commission (SEC) has been very precarious about Cryptocurrencies in the past and has been quite stern in its feelings over the digital economy. SEC has been pretty outspoken over the last few months on its views of Cryptocurrencies and their tokens. It was pretty firm on the fact that all tokens should be classed in the securities category. However, the commission has begun to turn around its views on this particular topic and is now beginning to favour utility tokens a little more.

It also looks as if SEC may well be venturing gradually into more new territory as it considers a couple of bitcoin exchange-traded funds (ETFs). Whatever the final decision, this is somewhat of a monumental occasion and shows SEC’s confidence in the digital economy growing.

SEC Is Contemplating ETFs

What’s An ETF?

Exchange-traded funds are very similar to stocks that are traded on stock exchanges although the risk is a lot less with ETFs. Because of how ETFs are set up, many investors prefer them because they allow said investors to put their money into several places and diversify their investments. The reason behind this is that when you invest in an ETF, you are actually buying an element of that fund, how it is built and how the money is spent. There are two types of ETFs that need to be considered.

With the likes of the physical-backed bitcoin ETF, investors feel that they are in a great position because they can be involved in the Cryptocurrency market without having to own any coins at all. This means that there is less risk for the investor especially if they are concerned in dealing with the digital economy.

In comparison, futures-backed bitcoin ETFs do not even base their shares on the Cryptocurrency, instead they use Bitcoin Futures Contracts. These contracts have a fixed price and also date on which to trade. This gives investors the opportunity to buy their contracts at different prices offering them possibly better profits. There is also lower risk with futures-backed bitcoin ETFs.

The ProShares ETFs

So back to the story at hand, SEC is in the midst of deciding on a couple of these ETFs. Both ETFs have been provided by ProShares, one of the larger ETFs suppliers. Both of the ETFs received approval from the Commodity Futures Trading Commission back in 2017.

The outcome of this ruling is certainly going to be interesting especially when SEC has just delayed another similar based decision on a physical-backed bitcoin ETF. The result is now set to be released next month. There are already 10 Bitcoin-related funds with SEC ready for their decisions. Funnily enough only one of them is a physical-backed bitcoin ETF. Many think that the futures-backed bitcoin ETFs stand more of a chance of getting approved.

It is great to see SEC becoming bolder and dipping their toes in the water with Bitcoin. Hopefully this will lead to more brave decisions being taken by the commission in the not too distant future.

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