The US Securities and Exchange Commission (SEC) has approved the first Bitcoin ETF introduced by ProShares, an American provider of specialized exchange-traded products (ETPs).
The shares will be listed on the New York Stock Exchange Ark starting Monday under the symbol BITO with 95 basis points.
According to the amended prospectus filed on October 15, the effective approval date is expected to be October 18, moving forward with the first Bitcoin ETF officially bearing the SEC seal. The ProShares ETF is linked to Bitcoin futures contracts, but is not directly linked to the current price of Bitcoin. The approval represents a watershed moment for the crypto space and blockchain.
The Commission, which both delayed and ignored the large amount of ETF Bitcoin requests that started in a wave more than four years ago, appears to have loosened its iron grip on cryptocurrencies and its necessary regulatory restrictions.
Exchange traded funds (ETFs) represent investment products that track the price of assets, commodities or stocks. In the case of Bitcoin, it will be treated in the same way as a traditional asset. ETFs can be bought, sold or traded during normal market hours and can be incorporated into other financial products such as retirement funds, insurance or even traditional savings plans, included as a percentage of those product packages.
While the ProShares Bitcoin ETF is not directly linked to actual Bitcoin prices as they move through various market volatility vectors, like a futures-backed ETF, it has a greater chance of SEC approval. SEC President Gary Gensler advised companies applying for a Bitcoin ETF to abandon a “pure” Bitcoin ETF that would instead closely follow the actual Bitcoin price.
“An increase in Bitcoin prices may not result in a similar increase in the value of a fund that holds positions in Bitcoin futures contracts. This is in part because funds that trade commodity futures contracts may not have direct exposure to the underlying assets of the contracts. Prices for futures contracts may vary with the months of delivery and may differ from the spot price of the underlying commodity. Futures contracts also expire periodically, resulting in fluctuations in portfolio exposure as expiring futures positions are generally converted into new contracts,” the SEC said in a released Investor Bulletin suggesting approval by the ProShares ETF before its official announcement.
Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits.
Check out our Investor Bulletin to learn more: https://t.co/AZbrkpfn8F
— SEC Investor Ed (@SEC_Investor_Ed) October 14, 2021
So far, companies on the waiting list for ETF approval include Mike Novogratz's Galaxy Digital, Cathie Wood's ARK Invest. Two other Bitcoin futures ETFs are slated for SEC approval, with the now NASDAQ Valkyrie ETF certified, as well as offers from Invesco and VanEck, among others on the Commission's approval waiting list.