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Dec 31, 2021

Wall Street revives dream of a bitcoin ETF with new SEC filing

Bitcoin reaches new high, set for strongest monthly gain since 2019


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For years, regulators have quashed hopes of a Bitcoin exchange-traded fund, citing worries about everything from market volatility and industry manipulation to thin liquidity.

Just like Bitcoin itself, issuers keep fighting back.

VanEck Associates Corp. has started a new push to launch an ETF tracking the world’s largest digital currency, according to a filing Wednesday to the U.S. Securities and Exchange Commission. The VanEck Bitcoin Trust would reflect the performance of the MVIS CryptoCompare Bitcoin Benchmark Rate.

It’s a bold move for the New York-based firm. There have been multiple applications for crypto-tracking ETFs over the years, and the SEC has denied them all.

VanEck may be betting that a change in SEC leadership -- with Jay Clayton stepping down as chairman -- combined with Bitcoin’s growing adoption on Wall Street have improved the odds of regulatory approval, according to analysts.

“That VanEck has the confidence to file for a Bitcoin ETF might indicate some shifting viewpoints within the SEC,” said Nate Geraci, president of the ETF Store, an investment advisory firm. “A key to watch as this drama continues unfolding is who President Biden taps as SEC chair. That could be the difference in whether a Bitcoin ETF is approved in 2021.”

According to the filing, VanEck’s ETF plans to hold Bitcoin and will value its shares based on prices contributed by exchanges that MV Index Solutions GmbH believes represent the top five exchanges for the cryptocurrency.

Such an ETF “could be taken as bullish for Bitcoin because it does broaden the universe of investors who could be aware of Bitcoin,” said Everett Millman, finance expert with Gainesville Coins.

VanEck’s filing comes in a week when Bitcoin has continued to set record highs -- currently above US$29,000. The world’s largest digital asset has advanced about 300 per cent this year, catching the attention of some of Wall Street’s most famous investors, including Paul Tudor Jones, as well as mainstay firms like PayPal Holdings Inc.

While crypto fans see its rally continuing next year, many are also aware its high-profile surge could attract greater regulatory scrutiny. The new SEC chair may take a softer line than Clayton, but President-elect Joe Biden has nominated Janet Yellen as Treasury secretary. In the past she has described Bitcoin as a “highly speculative asset” and “not a stable store of value.”

“By filing now, it will restart the clock for a review when there will be new SEC membership and leadership,” said Todd Rosenbluth, director of ETF research for CFRA Research. “However, I think the SEC has made it clear they have concerns that need to be overcome.”