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Washington, D.C. – Today, Congressman Tom Emmer (MN-06) and Congressman Darren Soto (FL-09) sent a bipartisan letter to Securities and Exchange Commission (SEC) Chairman Gary Gensler questioning why, based on previous SEC-stated concerns, the SEC is comfortable allowing an exchange-traded fund (ETF) based on derivatives contracts to trade but not comfortable allowing a Bitcoin spot ETF to trade.

“The SEC’s approach to cryptocurrency regulation has been unacceptable. While the trading of Bitcoin futures ETFs is a great step forward for the millions of American investors who have been demanding regulatory clarity, it does not make sense that Bitcoin spot ETFs cannot also commence trading. As I am sure Chairman Gensler understands, Bitcoin futures are, by definition, a derivative of the underlying Bitcoin spot market,” Congressman Emmer said.

“American investors deserve consistency and choice. If the SEC cannot outline the perceived material difference in risk profiles, then they should allow ETFs based on spot Bitcoin to be traded. I look forward to Chairman Gensler’s response to our concerns,” Congressman Emmer concluded.

“Cryptocurrency has proven to be a driver of economic growth in our society,” said Congressman Soto. “Therefore, it is crucial for us to clearly regulate it in order to maximize the potential benefits and mitigate any risks. It’s important for us to come together to ensure that investors have consistency.”

Last month, the Securities and Exchange Commission (SEC) allowed trading to commence for two Bitcoin futures exchange-traded funds (ETF) that provide exposure to CME-traded Bitcoin futures.

While this is a step forward for millions of Americans who are demanding access to simple ways to invest in Bitcoin, these products are potentially volatile in contrast with a Bitcoin spot ETF. They may also impose substantially higher fees on investors due to the impact of rolling futures contracts each month.

Until October, the SEC chose not to approve Bitcoin futures ETF and Bitcoin spot ETFs due to concerns about the spot markets potential for fraud and manipulation. The SEC stated numerous times that these concerns could be alleviated if either of the following are demonstrated:

  1. The underlying Bitcoin market is resistant to fraud and manipulation
  2. A significant amount of trading happens on a regulated market.
The Bitcoin futures ETFs that commenced trading last week are based on CME Bitcoin futures contracts. The CFTC regulates the CME. Going further, over 90% of the CME Bitcoin futures pricing comes from Coinbase, Kraken, and Bitstamp – three spot Bitcoin exchanges. 

The trading of Bitcoin futures ETFs, based on regulated futures contracts that are based largely on three spot markets, begs the question of what makes a Bitcoin spot ETF, that is based on the underlying asset, any different? Both products are based on the spot market.

Read the letter here