SEC approves second bitcoin ETF under the ’33 Act
The Securities and Exchange Commission has approved Valkyrie’s XBTO Bitcoin Futures Fund, the second crypto exchange-traded fund to win the SEC’s nod after Teucrium’s bitcoin futures ETF.
Crypto asset manager Valkyrie’s ETF was filed under the Securities Act of 1933, commonly called the (‘33 Act). The regulation follows a slightly different pathway to approval as compared to most of the previously permitted bitcoin futures ETFs. Approved ETFs from issuers like ProShares, Valkyrie and VanEck were filed under the Investment Company Act of 1940.
Earlier in February, Valkyrie also listed its exchange-traded fund (ETF) offering exposure to stocks in bitcoin mining companies. The Valkyrie Bitcoin Miners ETF kicked off trading on the Nasdaq Stock Market under the ticker symbol “WGMI.”
The new offering follows the successful debut of the Valkyrie’s Bitcoin Strategy ETF on Nasdaq, which was preceded by ProShares Bitcoin Strategy ETF (BITO). The latter was the first Bitcoin futures ETF to get listed on a US exchange and accumulated more than $1.5 billion in assets in less than a month of trading.
Following the US regulators’ reluctance to approve a spot bitcoin ETF, many applicants have turned their focus to products offering exposure to the crypto futures market, bitcoin miners, or companies hold crypto on their balance sheets. Valkyrie itself was ordered by the SEC to withdraw its application for a leveraged bitcoin futures ETF.
SEC Chair Gary Gensler said that he would be open to approving a bitcoin-futures ETF, but only under certain conditions. The revelation rankled some fund managers who were hopeful of a physically backed ETF, but regulated like a normal exchange-traded fund under a 1933 law.
There are a number of applications underway to get a spot bitcoin ETF listed, but so far none have been approved by the SEC. The agency only extended the deliberation window or opened the matter to public comments to avoid reaching any decision on a proposal. Now, two approvals under the Securities Act of 1933 may potentially open the door or at least weakens the SEC’s argument to deny spot bitcoin ETFs.
ETFs that invest in futures contracts must continually roll forward the fund’s exposure as the contracts expire. Since issuers have to pay fees to do so along the way, the process eats into returns, causing the ETF’s performance to become unmoored from the underlying asset it tracks.