Former CFTC chairman explains why regulators should approve a Bitcoin ETF

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Timothy Massad, who served as chairman of the United States’ Commodity Futures Trading Commission between 2014 and 2017, has set out the reasons why he thinks regulators should approve an exchange-traded bitcoin fund.

In an opinion piece posted on Bloomberg on Wednesday, Massad said the Securities and Exchange Commission (SEC) should approve a Bitcoin ETF in a way that would improve the transparency and integrity of the burgeoning cryptocurrency industry. In this way, investors can access the digital asset without having to buy it from the stock exchange or worry about self-custody.

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Massad said the ideal way to get a Bitcoin ETF approved would start with a stronger regulatory framework for cryptocurrencies. However, he acknowledged that “the likelihood of this happening in the near future is slim”. In an interview with Cointelegraph in February, Massad described US crypto regulations as “Swiss cheese” or full of holes.

In the absence of comprehensive regulations, Massad said the SEC can leverage the ETF listing process to improve the integrity of cryptocurrency exchanges.

“Approval would be given on the condition that the ETF price is based on an exchange index that meets certain mandatory standards, similar to those used for securities and derivatives exchanges,” he wrote.

U.S. securities regulators have been reluctant to approve a Bitcoin ETF due to concerns about liquidity, transparency, and overt price manipulation. Several ETFs have been filed with the SEC, and each has been sent back to the issuer for review. The SEC is currently reviewing a handful of filings and has requested public comment on a prospectus filed by asset manager VanEck.

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Bitcoin ETF approval is at least a year away, according to at least one subject matter expert, Todd Rosenbluth. The head of ETF and mutual fund research at CFRA told CNBC in April that regulators are unlikely to give an ETF the green light in the near future.

North of the border in Canada, regulators have approved several Bitcoin ETFs and early trends seem to indicate the offerings are very successful. The Purpose Bitcoin ETF has continued to attract investment despite the massive correction in the Bitcoin price since May.