Carbon-Neutral bitcoin ETF from One River is rejected by U.S. SEC

[TL: DR]

1. U.S. SEC rejects One River's Carbon-Neutral ETF stating that it does not protect investors from fraudulent and manipulative acts and practices.
2. One River plans to offset the carbon footprint connected with the bitcoins in its fund
3. The SEC has approved futures-based Bitcoin ETFs
4. Microstrategy may take legal actions should SEC rejects its application
5. The over $7 trillion ETF industry in the United States is still looking for a Bitcoin ETF.

Keywords: SEC, Bitcoin ETFs, One River, NYSE Arca, spot Bitcoin ETF.



The One River Carbon Neutral Bitcoin Trust

---

On May 27, 2022, the U.S. Securities and Exchange Commission (SEC) issued a report that denied One River Carbon Neutral Bitcoin Trust's application to list its Bitcoin ETF under the New York Stock Exchange Arca.

The One River Carbon Neutral Bitcoin Trust is a spot Bitcoin exchange-traded fund (ETF) proposed by One River Asset Management. According to the proposal, One River planned to offset the carbon footprint connected with the bitcoins in its fund by retiring voluntary carbon credits equivalent to the daily expected carbon emissions linked with the bitcoins owned by the trust.

The application was filed by the New York Stock Exchange to the Commission on September 20, 2021, as a Proposed Rule Change to List and Trade Shares of the One River Carbon Neutral Bitcoin Trust under NYSE Arca Rule 8.201-E. (Commodity-Based Trust Shares).

The Commission found that NYSE Arca failed to meet its burden under Exchange Act section 6(b)(5) of demonstrating that its proposal was "designed to prevent fraudulent and manipulative acts and practices" and "to protect investors and the public interest."

This has been the Commission's tone of rejection on several other proposals that seek to list spot Bitcoin ETFs in the United States, as no proposal for a spot Bitcoin ETF has passed SEC regulatory requirements. The SEC is concerned about the possibility of Bitcoin market manipulation and fraud. It has indicated that it will not approve a spot-based application until worldwide exchanges are better regulated.


SEC approves of Futures-based Bitcoin ETFs

---

Last August, SEC Chair Gary Gensler stated that ETFs investing in bitcoin futures contracts on the Chicago Mercantile Exchange (CME) filed under the '40 Act would be considered favourably, citing the law's "significant investor protections."

The SEC approved ProShares and Van Eck's ETFs, which were based on futures contracts and filed under mutual fund guidelines that SEC Chairman Gary Gensler believes provide significant investor protection. Valkyrie and Teucrium's proposals for futures-based Bitcoin ETFs were also approved this year.


Microstrategy Considers Legal Action against SEC in its application

---

Futures-based Bitcoin ETFs track the price of bitcoin futures contracts, which are agreements to buy or sell Bitcoin at a predetermined price at a future date. In contrast, Spot Bitcoin ETFs are backed by physically settled Bitcoin rather than bitcoin futures contracts. Although both types of ETFs allow investors to gain exposure to Bitcoin within their budget, risk tolerance, and investing goals without going through exchanges, investors prefer the spot Bitcoin ETF because it allows investors to purchase Bitcoin in the fund at the spot price.

According to a May report, Grayscale Microstrategy, which is currently battling the SEC to convert its flagship fund, Grayscale Bitcoin Trust Fund (GBTC), into a Bitcoin spot ETF, has threatened to sue the SEC if it rejects its proposal, claiming that investing in a spot Bitcoin ETF is no less risky than investing in a futures-based counterpart.
With the over $7 trillion US ETF industry still waiting for a spot Bitcoin ETF, the SEC's approval of a spot Bitcoin ETF remains a matter of when.






Author: Gate.io Observer: M. Olatunji
Disclaimer:
* This article represents only the views of the observers and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted, provided Gate.io is referenced. Legal action will be taken due to copyright infringement in all other cases.