According to crypto industry experts, if the SEC should approve a BTC ETF, it will increase investors’ confidence in the burgeoning crypto space and facilitate its overall growth.
The SEC’s Reluctance
The SEC has been unwilling to approve any BTC ETF despite many such applications at its desk. The SEC has received a new BTC ETF filing from Digital Fund LLC, whose BTC ETF is built on the Algorand blockchain. On Thursday, the Florida-based company filed the application, titling it “the digital funds S&P 500 BTC 74/25 index ETF.”
An interpretation of the ETF proposal shows that digital funds intend to invest 75% of its asset under management in “the top S&P 500 index companies” while the remaining would be invested in BTC futures contracts. The firm disclosed that these ETF shares are tokenized, and their record would be on the Algorand blockchain. The application also revealed that these ETF shares could be traded on the Algorand blockchain in a peer-to-peer manner similar to cryptocurrency transactions.
Does This BTC ETF Have A Higher Approval Chance?
Many industry analysts opined that the SEC might approve this BTC ETF since it is a futures ETF and doesn’t have the exact attributes of a traditional BTC ETF. Futures ETFs are BTC futures contracts settled via fiat on CFTC-registered commodity exchanges.
Since this application is a futures ETF, the SEC might approve it even though it is the newest of the BTC ETF applications it has received. This argument holds because the previous BTC ETFs that the SEC approved were BTC futures ETFs. Recently, the SEC approved the teucrium BTC ETF to make a total of four approved BTC futures ETF while it is yet to approve any spot BTC ETF.
The Uniqueness Of This BTC ETF
Besides being a futures ETF, the SEC may approve this ETF because peer-to-peer trading isn’t done the traditional way. Instead, equity trading on it will be done on the Algorand blockchain. This is possible because of the instant finality feature on the blockchain, which confers lesser liquidity permission on tokenized shares.
Also, there are no counterparty risks because no third party is involved in any transactions. Part of the ETF filing further disclosed that Algorand is the chosen blockchain because it helps eliminates fraud and ensure transaction transparency.
This will inspire more investor confidence in the blockchain and, by extension, the crypto space. Despite the innovativeness of this ETF, many crypto investors still crave a BTC spot ETF, but no one knows whether the SEC will approve them eventually. The dip in the crypto market sector has negatively impacted Proshares BTC ETF, with investors taking $66m from the fund earlier this month.
The withdrawn amount reflects the crypto industry’s challenges since the beginning of the year. Multiple data show that investors withdrew more than $1 trillion from the market in Q1 2022 alone. The SEC’s approval of Proshares BTC futures ETF last October resulted in a massive rally for the leading crypto at that time.