For years, Bitcoin traders have hoped that the U.S. Securities and Exchange Commission (SEC) would approve the licensing of a cryptocurrency-based exchange-traded fund (ETF), which would theoretically allow significant money to flow into it. However, so far, the hopes of applicants seeking to establish such funds have been dashed, despite the approval of similar products in other countries. But with the increasing institutional adoption of Bitcoin, could 2021 finally be the year for licensing such a fund? Eric Balchunas, an ETF analyst at Bloomberg Intelligence, expresses more optimism than ever in this regard, explaining his reasons and analyzing the landscape in the following interview with Joe Weisenthal.
**Reasons for Optimism**
Eric asserts that no one knows for certain whether a Bitcoin-based ETF will be approved, unless you are inside the SEC. Everyone has become obsessed with this story since the Winklevoss twins first applied in 2013, and we have followed the matter through its various stages. It appears that there is a shift this year, and we are more optimistic about the approval of such a fund than ever before.
Regarding what has changed to make him more optimistic, Eric lists several reasons: First, institutional adoption of cryptocurrencies has grown significantly. Second, there has been tremendous growth in "virtual" products such as the Grayscale Bitcoin Trust (GBTC), which are not ideal for retail investors, and the SEC is aware of this. Third, there has been a flood of funds in Canada that have performed well and have seen a lot of activity and interest, and Canada has a history of progressing six months to a year ahead of the United States. Finally, Gary Gensler will be taking the helm of the SEC, and he understands the world of cryptocurrencies, having lectured on it at the Massachusetts Institute of Technology, although he does have some concerns.
It’s worth noting that Gensler taught a course on "Blockchain Technology and Cryptocurrencies" at MIT, and arguably, he understands more than most Bitcoin investors. He recently stated that he sees some cryptocurrencies as securities and intends to regulate this area since securities fall under the SEC's jurisdiction.
**Is Bitcoin Not a Priority?**
Eric explains that Canadian cryptocurrency ETFs attracted $2.3 billion in assets over three months, and the Canadian market size is equivalent to 1/27 of the size of the U.S. market, meaning this amount would be $60 billion in the U.S. market. Moreover, these funds topped the lists of the most traded funds in Canada.
As for the United States, it’s clear that regulators are occupied with other issues, such as the "Robinhood – GameStop" saga, along with concerns about "blank check companies," particularly regarding their accounting aspects. Additionally, there is increasing discussion about the energy impact used in Bitcoin production on the climate. Consequently, Eric believes there are more pressing matters that the incoming SEC chair will have to deal with, which could delay the approval of a Bitcoin ETF. Citing Gensler, he mentions, "We do not have a federal oversight system for cryptocurrency exchanges," suggesting that he is not entirely comfortable with these exchanges just yet.
