What Biden’s Crypto Order Means For Bitcoin ETFs

President Joe Biden on Wednesday ordered the most wide-reaching effort yet by the federal government to study and potentially regulate cryptocurrencies, a move that could bring regulators closer to approving spot cryptocurrency ETFs on the U.S. markets.

The order, according to a fact sheet released earlier in the morning, primarily orders the Treasury Department, the SEC and other agencies to study the potential threats to consumers and market stability.

It also orders the Federal Reserve to study whether a central bank digital currency is in the country’s security interests, and for relevant agencies to build frameworks for managing cryptocurrencies to maintain the country’s position as a leading economic power through standard-setting.

But there’ is little in the order itself hinting at whether the studies due within the next six months will point toward or away from allowing cryptocurrency in regulated investment vehicles.

In a briefing with reporters Tuesday night, a senior official at the White House said the administration has been holding “Crypto Sundays” with industry representatives prior to issuing the order. However, the official dismissed a question on when regulation could actually take effect.

“We don’t want to pre-judge what we’re going to do before … the agencies have had time to do their work and produce their reports and analysis that we are asking them to do,” the official said.

Bitcoin Remains Elusive

The SEC has for years shot down efforts by industry players to introduce an ETF that specifically holds bitcoin or other cryptocurrencies, consistently rejecting the argument that aggregating the price of bitcoin from the largest crypto exchanges provides better protection against price manipulation than a formal surveillance-sharing agreement.

The only way to get exposure to bitcoin through a U.S.-listed ETF currently is through funds that hold bitcoin futures traded on the Chicago Mercantile Exchange.

David Khalif, the head of operations at Viridi Funds, expects the SEC to keep its opposition to cryptocurrencies in ETFs in the short term due to fraud concerns despite the rosy tone from the White House.

While he expects it ’will take years for the Federal Reserve to fully understand the implications of a government-backed cryptocurrency, Khalif believes it and other regulatory frameworks around crypto could allay the SEC’s opposition to using the currencies in regulated investment vehicles.

“If the U.S. government does create a [Federal Reserve-issued digital currency], it is extremely likely that more crypto ETPs will be deemed safe for investors in the public markets,” he said.

Contact Dan Mika at [email protected], and follow him on Twitter