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SEC throws US investors on with Bitcoin-Lite stock ETFs

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Two Bitcoin-Lite stock ETFs have started trading in the U.S., and a third has been cleared by the Securities and Exchange Commission as the regulator slams investors demanding a true Bitcoin ETF.

The SEC has so far refused to approve exchange-traded funds that invest in the cryptocurrency itself, despite a number of asset managers and similar vehicles already operating in Sweden, Switzerland, Jersey, Germany and Canada.

There is growing speculation that it will approve one or more Bitcoin futures ETFs after encouraging comments from SEC chairman Gary Gensler. This is unlikely to be imminent, however, as the regulator has postponed the deadlines for its decisions on a quartet of futures ETFs proposed by Global X, Valkyrie, WisdomTree and Kryptoin by 45 days, with the deadline set for that first now has expired 11/21.

The Grayscale Bitcoin Trust, a private trust, has grown to $ 35 billion since it was launched in 2013, indicating the appetite for cryptocurrency in the United States.

Net inflows into dedicated cryptocurrency funds hit a four-year high of more than $ 2.5 billion last week, according to EPFR, a data provider.

Invesco has tried to partially fill the ETF void by introducing the Invesco Alerian Galaxy Crypto Economy ETF (SATO – in honor of Satoshi Nakamoto, the mysterious computer programmer who developed Bitcoin) and Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF ( BLKC), both of which started trading this week.

The funds invest at least 80 percent of their assets in companies that are “heavily” involved in activities such as cryptocurrency mining, trading and infrastructure, as well as in over-the-counter private investment funds that are related to crypto. BLKC also holds companies involved in the development of the blockchain.

By far the largest holding in both is the PowerShares Cayman Fund, followed by Bigg Digital Assets, which develops software to track, track, and monitor cryptocurrency transactions.

The SEC this week gave the green light to a third crypto-stock ETF, the Volt Crypto Industry Revolution and the Tech ETF (BTCR), which will invest in “companies that hold a majority of their net worth in Bitcoin, or a majority of their earnings achieve”. from Bitcoin mining, lending or the transaction ”.

The funds are following in the footsteps of the VanEck Digital Transformation ETF (DAPP) and Bitwise Crypto Industry Innovators (BITQ), which invest in stocks-related digital assets – such as MicroStrategy, a software company that claims it has a $ 5 billion balance sheet and Coinbase, a Crypto exchange platform – and the Amplify Transformational Data Sharing ETF (BLOK), which holds a portfolio of companies involved in the development and use of blockchain technologies.

Todd Rosenbluth, director of ETF and mutual fund research at CFRA Research, thinks some of the new vehicles make sense.

“In the longer term, there is an ecosystem of businesses that can benefit as the cryptocurrency becomes more widely used,” he said.

“It’s still very early for both bitcoin and blockchain technologies. These companies have a future, but since it is still an early stage investment, it is not clear who the winners and losers will be.

The latest approvals come despite significant concerns within the SEC about the infrastructure underpinning the crypto market.

On Tuesday, Gensler described crypto finance as the “Wild West, or the old world of ‘Buyer Beware'” that existed before securities laws were enacted.

“This asset class is rife with fraud, fraud and abuse in certain applications. We can do better, ”he told the House Financial Services Committee.

The comments reflected broader opposition from the SEC to riskier ETFs. Gensler warned earlier this week that leveraged funds pose a risk to financial market stability and called for stricter rules for these complex vehicles.

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