the rush is on for asset managers to create the first bitcoin exchange traded fund in the u.s
after SEC Chairman Gary Ginsler signaled he would be open to a pathway for approval of etfs
of popular crypto assets as new technologies come along we need to be sure that we're achieving our
core public policy goals and in finance what's that about protecting investors and consumers
guarding against illicit activity and ensuring financial stability but there are some caveats
to all this of course and joining me to break down all the latest is Todd Rosenbluth he's the head of
etf and mutual fund research at CFRA so Todd what do you think of the sec chairman's recent comments
on all this and what it means for investors so we at cfra had expected there would not be approval
for a bitcoin etf a physical bitcoin etf which is what was being offered by many of the asset
managers for years to come the tea leaves just didn't look positive the comments out of the sec
were quite negative in terms of the risks related to bitcoin risks related to an etf that held
bitcoin and so this was a breath of fresh air this gives those that are seeking a bitcoin etf
optimism including asset managers that might bring a product to market but there's still some
unknowns that we're still trying to sort through when he was talking about this it looked like
a futures based etf would probably be the first thing that comes onto a market versus a physical
one can you talk a little bit about what that difference means and if there's any performance
differences in those types of funds sure so let's try to tackle that in two different areas the sec
seems more comfortable with a futures-based product there's some enhanced uh risk controls
with the futures market the futures market uh is more regulated there's more insight as to what's
happening as opposed to physical bitcoin which would be completely unique uh from a
an investment perspective so the sec seems more comfortable in the way that it's structured as
a futures-based product now however up until recently there weren't futures based products
that were being proposed by asset managers in part because they're quite different within
what we see with a physical at least when we're talking about gold or other commodity oriented
products as you touched on there can and likely will be performance differences a futures is a
just that it's a guesstimate as to where this asset class is going as opposed to where it is
uh and so there will be a often performance differences between a futures-based product
and the physical security that it's attempting to provide exposure to and then lastly if i
may there's costs that are related to each month rolling forward the futures
to the next month now it's okay if you're if it's up significantly it's going to eat in a bit but
it's going to eat into the potential returns and that's something investors need to be wary of
or at least aware of yeah that's a great point and as you said you know a lot of asset managers
have been pushing at least for the last decade to get a physical crypto etf to the market you know
can you get a sense that you know these latest comments have we reached a tipping point with uh
bitcoin and cryptocurrency hitting mainstream that the sec is finally you know being open to this
i think it's more that the fcc wants it on terms that they can better control the risk
environment i think there is demand for such a product there's long been demand for a product
but the more asset managers that enter the marketplace or potentially enter with a filing
these are well established asset managers uh wisdomtree globalx vanack vectors among them
that have a proposal these are firms that know how to talk to etf investors and also know how to
talk to the sec about how to bring them a product to market but i don't expect the sec is feeling
pressure to bring something to market i think they want to do it the right way because once you once
they have they say it's okay to launch a product it's out there and then there's nothing they can
do to limit the risk uh after the fact the way they can before the fact you mentioned banach
and a couple of these other funds and you know in the few weeks since uh these remarks there have
been a number of applications for some of these bitcoin futures etfs um so as far as the timeline
what's your sense when do you think investors can expect to see these funds come online
that's the major unknown so before we had futures based products we thought it would be years uh now
it's conceivable that something comes to market or not comes to market is approved it obviously
could come to market soon after by the end of the year we think 2022 is perhaps more reasonable if
for no other reason then the sec likely does not want to play favorites if this is the whatever the
first product that comes to market is likely to see assets and then the second less asset than the
third less and so forth this is going to be a race to launch the first product it seems reasonable
that the sec wants to get enough of these firms that are willing to follow their rule book to
launch a product at the same time and that's going to require uh trying to line these things up and
that probably is 2022 at the earliest in our opinion well todd thank you so much for your
insights today it's very much appreciated thank you have a great day and you can head on over to
investors.com for more of our crypto coverage for investors business daily i'm alexis garcia
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