U.S. Securities and Exchange Commission (SEC) chair Gary Gensler recently introduced new rules aimed at reducing risk in the U.S. Treasury market. These regulations require a greater number of trades to go through clearing houses and introduce collateral requirements for central clearing agencies, among other things. While these rules are intended to address concerns in the Treasury market, Gensler was dismissive when asked about the pending applications for spot Bitcoin ETFs.
When Bloomberg reporter Kaily Leinz shifted the conversation towards the spot Bitcoin ETF applications, Gensler smiled before stating, “There’s something very significant about the $26-trillion-dollar Treasury market, which is really the basis of our entire capital market. It’s how we fund our government, it’s how our Federal Reserve does monetary policy, it’s how we maintain the dollar dominance around the globe, and you want to ask me about crypto?” Gensler downplayed the importance of crypto ETFs by comparing them to the Treasury market, emphasizing that cryptocurrencies are much smaller and not integral to government funding or monetary policy.
Despite his dismissive comments, Gensler did acknowledge the existence of several pending spot Bitcoin ETF applications. He revealed that there are “somewhere between eight and a dozen” applications in progress, with staff from various divisions responding to these findings. Gensler also made a passing reference to a court outcome that may require the SEC to consider Grayscale’s ETF conversion application. However, he did not directly address whether the SEC’s current level of engagement signifies progress.
The SEC has been actively engaged with spot Bitcoin ETF applicants, holding meetings in late November and December. Some applicants, including BlackRock, have submitted multiple amendments to their proposals. These discussions largely revolve around cash and in-kind redemption and creation methods, which will determine whether participants can transact in cryptocurrencies. While Gensler and the SEC have not given a clear indication of when or if a spot Bitcoin ETF will be approved, there is optimism among some industry members. Bloomberg ETF analysts Eric Balchunas and James Seyffart have suggested a 90% chance of approval by Jan. 10, 2024.
Gary Gensler’s remarks regarding spot Bitcoin ETFs reveal his focus on the importance of the Treasury market and his dismissal of the significance of cryptocurrencies. While the SEC has introduced new rules to address risk in the Treasury market, the approval of a spot Bitcoin ETF remains uncertain. Despite this uncertainty, industry analysts remain hopeful that approval may be on the horizon. Only time will tell how the SEC will navigate the complexities of the cryptocurrency market and its potential impact on the financial landscape.
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