Is The Bitcoin Spot ETF Coming To The US?

By offering a regulated and easily accessible investment vehicle, the Spot Bitcoin ETF has the potential to attract a broader range of institutional investors to the crypto marketplace.

In this article, we’ll review the current state of the Bitcoin Spot ETF across four markets: US, Europe, Canada, and Australia.

Table of Contents

• What is a Bitcoin ETF?
• US Market
• European Market
• Canadian Market
• Australian Market
• Summary
• Additional Crypto News

What is a Bitcoin ETF, and how does it work?

ETFs (exchange-traded funds) are a collection of assets whose shares are traded on a stock exchanges. ETF shares, like those of individual stocks, are traded throughout the day at varying prices based on the supply and demand in the market.

Similarly, Bitcoin ETFs track Bitcoin’s value and trade on traditional stock exchanges rather than crypto exchanges. They allow investors to invest in Bitcoin without the inconvenience of using a cryptocurrency exchange.

ETFs

United States

To date, the SEC has so far rejected all spot Bitcoin ETF applications.

• The SEC did approve the first Bitcoin futures ETF in October 2021 — the ProShares Bitcoin Strategy ETF — which debuted on the New York Stock Exchange on Oct. 19, 2021.

However, in 2023 alone, nearly half a dozen institutional giants have filed fresh spot Bitcoin ETF applications in hopes of becoming the first U.S approved spot BTC ETF.

This list includes: BlackRock, ARK, Wise Origin, WisdomTree, VanEck and Invesco Galaxy.

Blackrock’s ETF Proposal

• The iShares Bitcoin Trust represents fractional undivided beneficial interests in its net assets. The assets of the Trust consist primarily of bitcoin held by a custodian on behalf of the Trust. The Trust seeks to reflect generally the performance of the price of bitcoin.
• The Trust intends to issue Shares on a continuous basis. The Trust issues and redeems Shares only in blocks of 40,000 or integral multiples thereof. A block of 40,000 Shares is called a “Basket.” These transactions take place in exchange for bitcoin.
• The Shares will be listed and traded on NASDAQ

Europe

Europe’s first spot Bitcoin ETF is set to debut later this year.

• Press Release: Jacobi Asset Management Receives Approval to Launch the World’s First Tier One Bitcoin ETF

The Jacobi Bitcoin ETF received approval from the Guernsey Financial Services Commission (GFSC) to launch its Bitcoin ETF in October 2021. The asset manager told the Financial Times that it has decided to launch the ETF now because it has seen a gradual shift in demand compared with 2022.

The Jacobi Bitcoin ETF is a centrally cleared crypto-backed financial instrument with custody supported by Fidelity Digital Assets, a major shift from the usual exchange-traded notes (ETNs).

• Fidelity Digital Assets is a subsidiary of Fidelity Investments and operates as a separate business dedicated to digital assets.

ETFs vs ETNs

In Europe, all crypto-backed traditional financial instruments were structured as ETNs, rather than funds.

The major difference between an ETN and an ETF is that the ETF shareholder owns a portion of the fund’s underlying assets, while ETN investors own debt security. ETFs, unlike ETNs, cannot be leveraged or use derivatives, which could otherwise lead to “significant counterparty risk”.

ETFs vs ETNs

Canada

In Canada, the Spot Crypto ETF is already available.

In fact, three funds, Purpose Bitcoin, 3iQ CoinShares and CI Galaxy Bitcoin, have been approved by regulators in the country:

• Purpose Bitcoin ETF (BTCC.U): ETF invests directly in physically settled Bitcoin, and the ETF is be backed directly by physically settled Bitcoin holdings.
• 3iQ CoinShares Ether ETF (ETHQ.U): ETF’s investment objectives are to provide holders of units of the Ether ETF with exposure to the digital currency Ether and the daily price movements of the U.S. dollar price of Ether
• CI Galaxy Bitcoin ETF (CMCX.U): ETF provides exposure to bitcoin and ether, the two largest cryptocurrencies globally by market capitalization. The ETF gains exposure to bitcoin and ether by investing in units of CI Galaxy Bitcoin ETF (TSX: BTCX) and CI Galaxy Ethereum ETF (TSX: ETHX).

Australia

Australia has joined the U.S. in a push to get their first fully-licensed spot Bitcoin ETF listed on retail markets as the Bitcoin-focused asset management firm Monochrome, in partnership with Vasco Trustees, has re-filed its application with the Australian Securities Exchange (ASX).

• Monochrome is the Investment Manager for the Monochrome Bitcoin Trust (IBTC). Vasco Trustees is the Responsible Entity and the issuer of interests in IBTC.

The application for the Monochrome Bitcoin ETF (IBTC) is the first spot BTC ETF filed under Australia’s new regulatory guidelines that include cryptocurrency-related provisions.

Policy Roadmap

According to the announcement, Monochrome’s responsible entity partner, Vasco, is authorized under its Australian Financial Services License to offer retail investors direct and regulated exposure to Bitcoin and Ether (ETH) via two managed investment schemes — the Monochrome Bitcoin ETF and the Monochrome Ethereum ETF.

Summary

We started this article with a question:

Is The Bitcoin Spot ETF Coming To The US?

As things stand currently, especially with heavy weights such Blackrock entering the mix, the answers appears to be a strong yes.

Additional Crypto News

1. Citadel Launches New Crypto Exchange
2. Hong Kong Set To Become Crypto Trading Hub
3. Europe Approves World’s First Cryptocurrency Regulations

1. Citadel Launches New Crypto Exchange

EDX Markets, a newcomer to the cryptocurrency exchange landscape, has made a notable entry with backing from some of Wall Street’s biggest institutions including Citadel Securities, Fidelity Investments, and Charles Schwab (additional investors include Miami International Holdings, DV Crypto, GTS, GSR Markets LTD, and HRT Technology).

The company unveiled the launch of its digital asset market on June 20, 2023, marking its official entry into the industry.

Currently, EDX supports the trading of only four cryptocurrencies, namely: Bitcoin, Ether, Litecone and Bitcoin Cash, none of which have been identified as securities by the SEC. Such a conservative approach to listing cryptocurrencies could help EDX stay out of trouble with the SEC, which has sued Coinbase and a number of other crypto exchanges for listing coins that the agency deems to be securities.

According to the announcement, the exchange hopes to attract “industry leaders” by incorporating best practices from traditional finance and offering unique advantages, including liquidity, competitive quotes, and — most importantly — a non-custodial model designed to minimize conflicts of interest, and avoiding entanglements with the SEC.

EDX Chief Executive Jamil Nazarali — who was a longtime executive at Citadel Securities before joining EDX — said that the failure of FTX stoked demand for a crypto exchange without the built-in conflict of interest that comes with storing customer funds.

In contrast to EDX, most current crypto exchanges require their customers to park their digital coins in wallets run by the exchange, creating the risk that the exchange could lose the funds or be tempted to “misuse” them.

Additionally, unlike most crypto exchanges, EDX won’t directly serve individual investors. Instead, it expects that retail brokerages will send investors’ orders to buy and sell digital coins to its marketplace. The stock market operates under a similar model, in which investors don’t directly access the New York Stock Exchange or Nasdaq, but instead submit orders through brokerages such as Fidelity and Schwab.

2. Hong Kong Set To Become Crypto Trading Hub

In Asia, South Korea and Singapore have taken the lead in regulating the crypto market, but after years of crackdowns, crypto trading is coming back to China… or at least to Hong Kong for now.

• Trading of cryptocurrencies in the Chinese territory has been restricted to institutional investors and other professionals since 2018, but Hong Kong’s new regulations will allow retail trading as soon as the second half of 2023.

Requirements for obtaining a license include capital of at least 5 million Hong Kong dollars ($638,000), measures to combat money laundering and the appointment of experienced managers.

More than 80 companies have expressed interest in obtaining a license, authorities say. Mainland Chinese companies are particularly eager to enter the Hong Kong market, because they face a total ban on providing cryptocurrency-related services at home.

3. Europe Approves World’s First Cryptocurrency Regulations

In May of 2023, The European Union approved a set of rules — the first such regulation in the world — to regulate crypto assets like cryptocurrencies and tokens in a bid “to curb money laundering activities and protect investors”.

The markets in crypto-assets (MiCA) legislation was approved on May 16, 2023 by EU ministers.

• MiCA covers issuers of utility tokens, asset-referenced tokens, as well as stablecoins. Service providers like trading venues and crypto wallets also come under its purview.
• The legislation is on track to become law in the EU region this summer, and is expected to be rolled out from 2024. Firms looking to issue, trade, or safeguard crypto assets in the EU bloc will have to secure a license to do so.
• Beginning January 2026, service providers in the crypto industry will have to obtain the names of senders and beneficiaries of digital assets irrespective of the amount involved in the transaction.
• MiCA also establishes liquidity and disclosure requirements for crypto companies. The management of a crypto firm may be fined in case they fail to make sure the reserve funds are properly managed.

Inside MiCA: Section by Section