In an effort to allay investor concerns, a commissioner from the SEC has clarified that the Bitcoin products that have just been authorized are ETPs, not ETFs.
On January 10, members of the United States Securities and Exchange Commission (SEC) voiced their opinions on the approved spot Bitcoin products.
Caroline A. Crenshaw was one of the commissioners who voiced her disagreement by bringing up issues related to Bitcoin and the market, including fraud and manipulation. Her main point was that she disagreed with the recent approvals’ character, saying:
“I am worried that people won’t understand what these products are (they’re not the common exchange-traded funds that millions of people use to save for retirement, which are registered under the Investment Company Act of 1940) and that investors will assume there are safeguards when there aren’t any.”
The new products are really exchange-traded products (ETPs) according to the Securities Act of 1933, as Crenshaw clarified in a footnote.
Other SEC members referred to the items using similar language. The products were also called ETPs in the remarks of Commissioners Hester Peirce and Mark Uyeda, who were in agreement with the approvals. In his own statement, SEC head Gary Gensler also referred to the approvals as ETPs. Gensler, who was skeptical of the recent decisions, voted in support of them.
The other members of the SEC who did not disagree with Crenshaw did not clarify the distinction between the two investment vehicles.
Bitwise, Hashdex, Ark Invest, Invesco Galaxy, and Franklin Templeton are among the companies whose offers have the letter “ETF” in the SEC order that authorizes the applicable products. But all through the order, the products are characterized as spot Bitcoin ETPs.
In certain contexts, the two words may coexist. According to Finra, an independent agency that oversees the securities industry in the United States, ETFs are a subset of ETPs, and the organization acknowledges that “there is no single definition of an exchange-traded product.”
Whether or not the consequences for the asset managers responsible for each product also affect investor safety is an open question. In particular, it is not apparent whether such companies are required to explicitly state the difference in their public statements.
Notably, in a recent news release, Grayscale called their service an ETF. The most recent round of approvals was also referred to as ETFs in a blog post by Coinbase, a company that provides custodial and surveillance-sharing services for a variety of products.
