Retail Demand Might Force SEC To Approve A Bitcoin ETF

A couple of investment firms and executives have debated the likelihood of a license for a US-based Bitcoin (BTC) exchange traded fund (ETF), one of which was the topic of a recent CNBC broadcast. On March 7, the topic was raised again and people questioned if retail demand might force the US Securities and Exchange Commission (SEC) to regulate Bitcoin in this way.

The discussion also follows the latest rejection by SEC on the last pending Bitcoin ETF application. In this event, we saw that Wilshire Phoenix had first filed the application for its proposed ‘United States Bitcoin and Treasury Investment Trust’ with the SEC during January of 2019.

Despite amending the application six times in 13 months, the SEC rejected Wilshire Phoenix and its ETF, citing major concerns about manipulation of Bitcoin’s market as well as limited investor protections. This story was viral in the crypto news at the time.

The retail demand now shows that SEC could investigate Bitcoin ETFs further. The director of institutional business development at ETF and the hedge provider IndexIQ, recently predicted that a Bitcoin ETF will come as retail demand for the product grows. He said:

“I doubt very heavily that it’s going to be the last straw,” Hempstead stated. “I think everyone will continue to listen to the feedback and the notes from the SEC, what their comments are, and they will continue to address it.”

Despite the prediction that the commission will reconsider its stance if faced with widespread demand in the coming years, Hempstead does not predict “any significant changes to the SEC’s decision in the near future.”

“At some point, when market demand and investor demand pushes the pendulum to a certain area, they will probably take another look at it and have different kinds of considerations,” he noted.

When asked about stablecoins such as Facebook’s and the Libra news, Hempstead predicted that stablecoins and other cryptocurrency products will become regulated as the sector matures and the public gains a greater understanding of the inner workings of distributed ledger technology (DLT).

“I think that maybe part of what they’re waiting for is a little bit more structure and oversight into the operational complexity of cryptocurrency transactions […] I think when we start to see more risk diversification, and more understanding about how these various products, not just Bitcoin, how they operate – I think that’s probably what’s needed at the Commission level,” he concluded.