The Significance of the Treasury Market Versus Crypto ETFs

The Significance of the Treasury Market Versus Crypto ETFs

The 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 rules, as reported by Reuters, require a greater number of trades to go through clearing houses and introduce collateral requirements for central clearing agencies. Gensler emphasized the importance of the $26-trillion-dollar Treasury market, stating that it is the foundation of the entire capital market, funding the government, driving monetary policy, and maintaining dollar dominance worldwide.

Amidst discussions about the Treasury market, Gensler downplayed the importance of spot Bitcoin ETFs. He highlighted that the crypto market is significantly smaller and does not play a role in funding the government or conducting monetary policy. Furthermore, Gensler acknowledged that many investors have been harmed in the crypto market due to non-compliance issues.

Pending Spot Bitcoin ETF Applications

Despite his dismissal of crypto ETFs, Gensler acknowledged that there are several spot Bitcoin ETF applications pending with the SEC. Although he did not provide a precise number, he mentioned that somewhere between eight and a dozen applications are currently in progress. The SEC’s staff from various divisions are actively responding to these findings. Gensler also mentioned a court outcome, which may require the SEC to consider Grayscale’s ETF conversion application.

Gensler did not directly address whether the SEC’s engagement with spot Bitcoin ETF applicants indicates progress in approving such ETFs. However, it is worth noting that the SEC has been meeting with various applicants since late November, continuing into December. Some applicants, including BlackRock, have submitted multiple amendments during these discussions. One significant point of consideration has been the distinction between cash and in-kind redemption and creation methods, as it determines the eligibility of ETF participants to transact in cryptocurrencies.

Despite the SEC’s silence on the potential approval of a spot Bitcoin ETF, there is hope within the industry. Bloomberg ETF analysts Eric Balchunas and James Seyffart have suggested a 90% chance of approval for a spot Bitcoin ETF by January 10, 2024.

While Gary Gensler prioritizes the new rules aimed at reducing risk in the Treasury market, his dismissive attitude towards spot Bitcoin ETFs raises questions about the SEC’s stance on cryptocurrencies. The significance of the Treasury market cannot be understated, as it is intricately linked to government funding, monetary policy, and global dollar dominance. However, the growing interest in crypto ETFs and the potential for their approval indicate a shifting landscape in the financial industry. As stakeholders eagerly await the SEC’s decision, the door may be opening for increased mainstream adoption of cryptocurrencies.


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