The Securities and Exchange Commission (SEC) has put forward regulations aimed at simplifying the process of bringing new exchange-traded funds (ETF) to the market. The changes will mean that a special permit form the regulator will no longer be needed.
Why it is important
- At the moment, in accordance with the Investment Company Act of 1940, before issuing an ETF, its necessary to obtain the regulator's permission. According to market participants, this act is becoming less relevant now as exceedingly more funds are appearing now.
- A change can reduce barriers to entry and increase competition in the market. Thus, this can lead to a significant increase in the number of blockchain-ETFs.
SEC Chairman Jay Clayton said that the new rule would “level the playing field.” “The proposed rule would cover most ETFs operating today and all similar ETFs that sponsors may seek to launch in the future,” he added. At the same time, for some ETFs with a complex mechanism, the rule will not apply.
Changes can lead to the spread of blockchain-ETF, which, instead of investing in cryptocurrencies, rely on technology and companies that develop it. Traditional investors are attracted to this tool as its less risky than cryptocurrencies.
It is worth noting that SEC does not provide a specific comments on the future of bitcoin-based ETF. At the same time, the regulator said that it’s considering more than a dozen applications for similar funds. Only this year, at least seven bitcoin-based ETFs were launched.
Such ETFs are classified as thematic funds, dedicated to a certain narrow sector of the stock market. Such funds buy shares of companies working with crypto projects, have patents or investments in this field. However those funds that are directly involved with digital currencies are unlikely to be affected by the proposed changes.
By Ekaterina Ulyanova