Cathie Wood, the veteran fund manager behind ARK Invest, is launching a bitcoin ETF – the ARK 21Shares Bitcoin ETF – in partnership with Switzerland-based 21Shares.
What is the fund and what could it mean for cryptocurrencies?
The ARK 21Shares Bitcoin ETF’s objective is to “track the performance of bitcoin, as measured by the performance of the S&P Bitcoin Index”, says a filing with the Securities and Exchange Commission (SEC), the US regulator.
Until now, ARK has been piling into companies with heavy exposure to digital currencies, including the likes of Coinbase Global and Grayscale Bitcoin Trust. But launching a crypto ETF is big news even for a prominent crypto-bull like Wood.
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The ARK ETF is still pending approval from the SEC, so the fund may not launch for some time yet. But it’s not the only one in the pipeline. As Bloomberg points out, 14 cryptocurrency ETFs are currently awaiting approval from the SEC.
News of ARK’s ETF comes just days after the SEC postponed a decision on whether to scrap or accept a bitcoin ETF application from asset manager VanEck and from Valkyrie Digital Assets.
So what is the US stance on crypto ETFs?
As with the UK’s Financial Conduct Authority, the SEC is worried about the risks surrounding cryptocurrencies (cryptocurrency exchanges in the US are regulated by a variety of agencies at both state and federal level).
Last month, the SEC issued a scathing notice to investors last month warning them about the risks of bitcoin futures held in mutual funds (which are the only investment vehicles that are allowed to hold bitcoin futures). It urged investors to consider “the risk disclosure of the fund, the investor’s own risk tolerance, and the possibility, as with all investing, of investor loss”.
The SEC’s warning has led analysts to speculate that it may become more difficult for US ETFs to get the green light.
So could Wood’s bitcoin ETF persuade the FCA to lift its ban on ETFs?
In the UK, the Financial Conduct Authority does not regulate cryptocurrencies, but it has banned the sale, marketing and distribution of all crypto derivatives, including contracts for difference, options, futures and exchange-traded notes that reference unregulated transferable crypto assets by firms acting in or from the UK.
The ban which came into effect in January was prompted by extreme “volatility of underlying assets,” the FCA said. This effectively closes the door –for now – for any UK-listed bitcoin ETFs.
Any change in its stance depends on whether the backlog of ETFs is approved by the SEC or not. If they are not approved, it could ultimately seal the fate of crypto ETFs both in the US and the UK. But of course if the US does start approving more crypto ETFs, it theoretically raises the chance of crypto ETFs becoming accepted here in the UK
Until regulators don’t change course, cryptocurrencies remain a highly speculative investment.
While UK investors can’t buy crypto ETFs, they can still speculate on the currencies themselves. So educate yourselves on the subject, but treat them with extreme caution –cryptocurrencies remain a highly speculative and volatile investment.
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