Gold ETFs could shed light on the SEC's thinking about proposals for spot bitcoin funds

Quick Take

  • The Block spoke with Sui Chung, the CEO of Kraken-subsidiary CF Benchmarks that provides the index set to be used by several proposed spot bitcoin ETFs.

With most applications for a spot bitcoin ETF in an extended waiting period after the Securities and Exchange Commission last month delayed the ongoing processes with fresh public comment periods, the industry has gone from the excitement of waiting for a possible approval with bated breath to the doldrums of now just waiting.

The Block spoke about all the recent moves with Sui Chung, the CEO of Kraken-subsidiary CF Benchmarks that provides the index set to be used by some of the proposed spot bitcoin ETFs.

Chung, who has been intimately involved in the bitcoin ETF filing process over the years, spoke about the ongoing approval process and what might need to happen before one of the proposed funds eventually comes to market.

(The interview has been edited for length and clarity.

Extended the comment period

The Block: What's your read on everything we've seen over these past few months? 

Sui Chung: Quite a lot has happened, and then quite a lot hasn't happened. In the meantime, unsurprisingly, the SEC has extended the comment period for the spot bitcoin ETFs. 

We now have ether futures ETFs. So it's progress, no doubt. Having ether futures ETFs is better than not having ether futures ETFs, in my view. You've got people wanting to understand 'okay, how does this ether futures market work? How long has it been going? How liquid is it?' All the basic things, and that could only be a good thing, as more of the financial investment community learns about the crypto ecosystem.

It's very easy in the crypto space to think that everything should happen in five minutes. Because quite a lot does happen very quickly. You have a lot of very talented, very dedicated teams who throw all their resources and intellectual capacity at problems and solve them. But we've got to remember that we are now talking about the traditional financial sector, and it does not move at that speed.

The Block: What do you think it is that the SEC wants? We're in this extended comment period now, but is the SEC listening? Where is the discourse that matters actually happening?

Sui Chung: The discourse is happening within the four walls of the SEC. That's where the discourse is happening, and the comments, they do read them. They will become sort of agenda items within that internal discourse within the SEC. That's kind of how it works.

The ones that are more cogent, the SEC does address them. They do get read. However, it is not a dialogue. You make your statements. The SEC then writes up what they think of that. And there's no right of reply. So it's not a dialogue. That's the way it works, which can be frustrating.

Where's all the caution coming from? 

The Block: Where do you think their current caution, or their need for more time, is coming from, especially given that ETFs for futures have already been approved? What's the real difference? What makes the spot market more prone to risk or in need of increased scrutiny? 

Sui Chung: The stuff inside it, for a futures based ETF, is CFTC regulated futures contracts. So, in their view, that underlying instrument, that futures contract, is regulated by the CFTC, and therefore, it's a regulated instrument sat inside an ETF.

The SEC stance is that, when you have a spot ETF, the stuff inside, that instrument, that spot bitcoin, is not subject to regulation in the manner in which it is traded. It is traded on unregulated markets. The SEC has believed, up to now certainly, that that makes them fundamentally different.

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