• Interagency research may alleviate SEC crypto concerns around fraud and manipulation, WisdomTree’s chief legal officer said
  • The executive order does not affect the SEC’s stance in the short term, according to Global X’s director of research

On the heels of President Biden rolling out his inaugural executive order on cryptocurrency, US asset managers are touting the development as a bullish indicator for the long-awaited spot bitcoin ETF.

The timeline for the Securities and Exchange Commission’s approval of such a product, however, is anyone’s guess. 

The executive order focuses on crypto policy surrounding consumer protection, financial stability, risk mitigation, the country’s financial leadership, financial inclusion and responsible innovation.

Though industry watchers have called the order an important step in the policymaking process, some told Blockworks concrete legislation could take years.

Setting up a unified framework to dictate how the government will regulate crypto will reduce bureaucratic red tape and help would-be spot bitcoin ETF issuers learn the new rules of the road, according to Lara Crigger, managing editor of ETF Trends and ETF Database.

“If you are the US government and you’re going to do something as groundbreaking as, say, approve the first spot bitcoin ETF in the US, you’d need this framework in place before you could even consider doing it,” Crigger said. 

ETP issuers weigh in

Craig Salm, chief legal officer at Grayscale Investments, said regulators’ approval of a spot bitcoin ETF is a matter of when, not if.

The firm is trying to convert its Grayscale Bitcoin Trust (GBTC) to an ETF. Public comments have rolled in from investors — as well as executives from crypto companies such as Coinbase and BlockFi — with most supporting the move. The SEC is expected to rule on the conversion by July after a 240-day review period.

“What the executive order will do is enable the SEC to do their own studies and have their own findings, which I believe will also result in support for a spot bitcoin ETF, because the markets are ready,” Salm said.

A spokesperson for the SEC did not immediately return a request for comment.

WisdomTree Chief Legal Officer Ryan Louvar said it’s not typical to see an executive order that involves so many governmental bodies and takes a global approach.

But financial regulators such as the SEC, Commodity Futures Trading Commission (CFTC) and the Office of the Comptroller of the Currency (OCC), are not prominently featured in the executive order. Rather, it relies on coordination and input from other agency heads, such as the secretary of state, the secretary of the Treasury and the attorney general.

“To the extent that the order is calling for research and coordination among federal agencies to continue to gain greater depth around the digital asset marketplace, part of that is the SEC’s concerns around potential fraud and manipulation,” Louvar said. “If this research, assessment and coordination can help address those concerns…I think that will potentially help spur or at least add the potential for an approval.”

The company amended its ETF application in December that would invest directly in bitcoin a week after the SEC rejected its original proposal. WisdomTree already offers ETPs in Europe that hold crypto directly.

Also offering such products overseas is Global X, which launched its first physically backed crypto offerings on Thursday. The bitcoin and ether ETPs (exchange-traded products) are now trading in Germany, and the company continues to pursue a US bitcoin ETF that it first filed with the SEC in July.

Pedro Palandrani, director of research at Global X, said the executive order urges the SEC to build a roadmap toward mitigating risk while also embracing financial technology upgrades, but it does not affect the agency’s views in the short term.

“A spot ETF approval, or lack of, really relies on the SEC’s approach towards the space and, while it’s not easy to paint a picture of how this will evolve over time, the mandate focuses on encouraging a working plan towards its potential adoption,” Palandrani said.

Hany Rashwan, CEO of Swiss ETP issuer 21Shares, called the executive order a “significant step” that could open doors for the firm in the US. The world’s largest ETP provider, the firm has 28 products trading across Europe and filed last year to launch a bitcoin ETF in the US with Ark Invest.

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  • Ben Strack is a Denver-based reporter covering macro and crypto-native funds, financial advisors, structured products, and the integration of digital assets and decentralized finance (DeFi) into traditional finance. Prior to joining Blockworks, he covered the asset management industry for Fund Intelligence and was a reporter and editor for various local newspapers on Long Island. He graduated from the University of Maryland with a degree in journalism. Contact Ben via email at [email protected]