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Ric Edelman, founder of Edelman Financial Engines

Portfolio > Alternative Investments > Cryptocurrencies

Ethereum ETFs Are Here. Is Spot Bitcoin Next?

By Ric Edelman

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In a significant move this month, the Securities and Exchange Commission approved nine exchange-traded funds that invest in ethereum futures contracts.

Does this mean the SEC will soon allow spot bitcoin ETFs onto the market?

Investors are anxiously waiting for the SEC’s decision. In August, the SEC was ordered by a court to vacate its rejection of Grayscale’s application to convert the Grayscale Bitcoin Trust into an ETF. Last week, the SEC decided not to appeal the court’s ruling in the Grayscale case or require Grayscale to refile its application, which could have delayed approval for as much as a year.

Although the arrival of ethereum futures ETFs is a welcome step toward the mainstreaming of crypto, there’s no assurance yet that the SEC will act immediately to approve the 10 pending spot bitcoin ETF applications.

The situation is frustrating for everyone. Everyone except SEC Chair Gary Gensler seems to understand that a spot bitcoin ETF would be in investors’ best interests, and greatly enhance consumer safety and protection against fraud.

ETFs are deservedly the most popular investment vehicle in the world; they feature low costs, low account minimums, transparency, liquidity, and ease of portfolio management.

It’s easy for advisors to engage in portfolio rebalancing, dollar cost averaging and tax loss harvesting.

Access to virtually every other asset class is available through ETFs — and there are even inverse, 3x and single-stock ETFs. So why not a bitcoin ETF?

Gensler’s refusal has raised everyone’s ire. Four members of Congress — two Republicans and two Democrats — wrote to the SEC in late September demanding that it approve these ETFs immediately.

There’s a bill in Congress to fire Gensler. At a recent conference, former SEC commissioners were unanimous in opposing Gensler’s handling of crypto.

Op-eds in the financial media have been relentless in criticism of Gensler’s performance, and both investors and advisors have long complained about the lack of these products — which have forced investors seeking to add crypto their portfolios into more expensive, less liquid and more complicated alternative products.

No one — not even Gary Gensler — has been able to explain how the absence of spot bitcoin ETFs has benefited investors. The SEC’s position is also harming U.S. innovation. Major crypto companies are moving overseas, where governments are more favorable to crypto innovation.

Blockworks moved its upcoming Digital Asset Summit from Washington, D.C., to London, citing a more positive regulatory environment. Coinbase is opening offices in Europe and Asia because it’s being stifled in the U.S.

All this is understandable, given the SEC’s refusal to engage in rulemaking. Two House subcommittees, led by French Hill, chair of the Financial Service Committee’s Digital Assets Subcommittee and Dusty Johnson, chair of the Agriculture Committee’s Digital Assets Subcommittee, have asked Gensler to assist in drafting crypto rules, but they’ve gotten no response.

Spot bitcoin ETFs are already available in Canada, Europe, Great Britain and Australia. The longer the SEC waits, the further behind the U.S. falls.

There’s no question that these ETFs will become available — anywhere from next week to next year. And sooner is more likely than later, given that the SEC decided last week not to appeal its loss in the Grayscale case. Now is the time for advisors to learn about this new asset class, so you’re ready to any client questions and can show them how to incorporate crypto into their diversified long-term portfolios.

Ric Edelman is an author and founder of RIA Edelman Financial Engines (earlier Edelman Financial Services). He now leads the Digital Assets Council of Financial Professionals.

Pictured: Ric Edelman

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