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A bipartisan push for SEC approval of Bitcoin spot ETFs

By Kevin Donovan

16:00, 4 November 2021

Bitcoin – Photo: Shutterstock

Two US lawmakers from opposing parties are asking the US Security & Exchange Commission (SEC) to approve exchange-traded funds (ETFs) indexed to Bitcoin spot prices.

Congressional representatives Tom Emmert, a Republican from Minnesota, and Darren Soto, a Democrat from Florida, jointly wrote a letter to SEC Chair Gary Gensler seeking approval to simply ways for people to invest in Bitcoin.

The letter, which repeatedly cites the prior approval of futures-indexed Bitcoin ETFs, represents a bi-partisan effort to pressure the SEC into allowing ETFs with more direct exposure to the largest cryptocurrency.

“We question why, if you are comfortable allowing trading in an ETF based on derivatives contracts, you are not equally or more comfortable allowing trading to commence in ETFs based on spot Bitcoin,” the lawmakers wrote. “Bitcoin spot ETFs are based directly on the asset, which inherently provides more protection for investors.”

Concerns about fraud and manipulation

The SEC’s reasoning for allowing Bitcoin futures-indexed ETFs is the perceived added layer of investor protection provided by the Chicago Mercantile Exchange, over which Bitcoin futures trade. The House Reps feel this is wrongheaded, given the correlation between the prices of both the underlying asset and the futures contracts present the same risks to both.

Citing the futures prices deriving primarily from Bitcoin prices from the three leading crypto exchanges, notably Bitstamp, Coinbase and Kraken, the risk to investors in either is comparable enough that investors should be allowed to choose which exposure they want.

“[T]o the extent the SEC has been concerned about fraud and manipulation in pricing of the underlying spot Bitcoin markets, that concern would have to permeate across both spot-based and futures-based ETFs,” the pair surmise.

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SPDR Gold Trust example

Further, the investment community evidently prefers direct asset exposure in general, as opposed to derivative exposure. Noting the relative size of SPDR Gold Trust, indexed to gold spot prices, in relation to Invesco DB Gold Fund, indexed to gold futures, investors clearly favour direct asset exposure, they argue.

“In its 15 years trading in the US public markets (SPDR Gold Trust), the largest of all commodities-based ETFs, has not experienced any material investor protection issues and holds $55bn in assets compared to (Invesco DB Gold)’s $50.4m (less than 1% as much).”

The legislators make clear they have no preference in spot-indexed versus futures-indexed funds, rather they feel investors should be able to decide for themselves how to allocate their portfolios.

“We do not intend to say that one method of exposure s better than the other… investors should have a choice over which product is more suitable for them and their investment objective.


174.67 Price
-0.070% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652


0.13 Price
+0.450% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872


65,921.70 Price
+0.040% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00


3,443.16 Price
-1.210% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

Digital asset community reacts

The letter was applauded by some in the digital asset community, who have a keen interest in future SEC decisions regarding cryptocurrency investment rules. “Bitcoin futures are based on spot Bitcoin,” said Grayscale Investment head of Legal Craig Salm over Twitter, thanking the House Representatives for the letter. “If you’re okay with one you have to be okay with the other. It’s that simple.”

Grayscale recently petitioned the SEC to convert its flagship Grayscale Bitcoin Trust into an ETF and is currently awaiting a decision either way.

Earlier this week, the SEC tabled its pending decision to allow the Valkyrie Bitcoin Fund to trade over the NYSE Arca exchange to nearly next year, the SEC announced.

‘The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised in the comment letters,” wrote SEC Assistant Secretary J. Matthew DeLesDernier. “Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,10 designates 7 January 2022, as the date by which the Commission shall either approve or disapprove the proposed rule change.”

Read more: Grayscale hopes for Bitcoin fund ETF approval by June 2022

The difference between stocks and CFDs

The main difference between CFD trading and stock trading is that you don’t own the underlying stock when you trade on an individual stock CFD.

With CFDs, you never actually buy or sell the underlying asset that you’ve chosen to trade. You can still benefit if the market moves in your favour, or make a loss if it moves against you.

However, with traditional stock trading you enter a contract to exchange the legal ownership of the individual shares for money, and you own this equity.

CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional stock trading, you buy the shares for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks.

CFDs attract overnight costs to hold the trades, (unless you use 1-1 leverage) which makes them more suited to short-term trading opportunities. Stocks are more normally bought and held for longer. You might also pay a stockbroker commission or fees when buying and selling stocks.

Markets in this article

SPDR Gold Shares
222.66 USD
0.78 +0.350%
SPDR Gold Shares
222.66 USD
0.78 +0.350%

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