December 9, 2021

BlockFi Files for a Bitcoin-backed ETF

It has been quite some time that the US Securities and Exchange Commission (SEC) has been reluctant of giving its approval for a bitcoin-backed exchange-traded fund. In a surprising move last month, the regulator had given approval for a futures-based exchange-traded fund. A renowned DeFi lending platform, BlockFi announced that it has also joined the long list of companies to have filed an application with the regulator for the approval of a bitcoin-backed ETF, but to no avail. On November 8th, the filing was published and it showed that BlockFi is seeking the approval of the SEC for an ETF that has been dubbed BlockFi NB Bitcoin ETF. 

If the regulator grants approval for the product, it will then be traded under the ticker ‘BBBB’. The exchange-traded fund will then issue shares that will depict the price movement of the BTC. Furthermore, BlockFi will also appoint a custodian who will have the responsibility of buying and selling the pioneer cryptocurrency on its behalf in order to meet the expenses and also for redeeming the shares of the Trust. They will make daily updates to the share price, depending on the value of Bitcoin in real-time. However, it is important to note that the ETF they have filed for is a bit different from what has been approved so far by the SEC.

Last month, the US regulator had given its approval for the Valkyries ETF and the ProShares Bitcoin Strategy ETF and these are actually backed by futures contracts. Once the ETFs were launched, they experienced some major gains. On the first day, the $BITO from ProShares managed to achieve trading volumes worth $1 billion. Up till now, the SEC has not given its approval for any ETF that’s backed by the physical Bitcoin, even though it has received more than a dozen applications for it.

Gary Gensler, the Chairman of the SEC, has taken a more positive stance when it comes to futures ETFs because they eliminate the possibility of price manipulation and are also able to offer better protection to the investors. However, there is a possibility that the SEC could give its approval for a Bitcoin-backed ETF in the future, keeping in mind that the $BITO ETF had experienced some major gains in the previous month upon its launch. It is important to note that BlockFi is not the only company to have filed for an ETF. 

A similar filing was made by VanEck and it is expected that either an approval or rejection will be announced on November 14th. Likewise, the world’s largest asset manager, Grayscale is also planning on converting its flagship Bitcoin fund into an exchange-traded fund that would be publicly traded. Even though the US has remained hesitant when it comes to launching a crypto ETF, there are countries that seem to be pushing for this product. Recommendations were recently issued in Australia regarding the introduction of Bitcoin and Ethereum based exchange-traded products (ETPs). Likewise, there are already Bitcoin and Ethereum ETFs in Canada and it was one of the first countries to give its approval. 

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