  Examining the intersection of cryptocurrency and government By Nikhilesh De Managing Editor, Global Policy & Regulation Oct. 19, 2021 If you were forwarded this newsletter and would like to receive it, sign up here. Sponsored by 
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Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De. You’re probably here because you signed up, but in case you're not a fan, you can unsubscribe here.
A bitcoin futures ETF launched this morning – and saw strong demand from investors.
This indicates some amount of market maturity and acceptance from the regulators at the U.S. Securities and Exchange Commission (SEC), but also raises new questions about whether the format of the product is appropriate for investors and when a physical ETF may go live.
—Nik
Executive intent  The narrative The first bitcoin (futures) exchange-traded fund (ETF) in the U.S. began trading today, bookending an eight-year effort to launch a widely accessible, regulated bitcoin investment product. Why it matters Advocates of a bitcoin ETF have sought for literally years to launch such a product. They’re finally getting their wish, but not in full – the first product will be a bitcoin futures ETF. While this is certainly something, it likely won’t receive the same amount of attention or asset inflow that a physical bitcoin ETF would have, which raises the question of whether a physical bitcoin ETF is possible at all, and what might need to happen to see one launch. Breaking it down Longtime readers may recall that in February I asked if 2021 would be the year we finally see a bitcoin ETF in the U.S. At the time the conclusion I drew was “well, maybe.”
There was genuinely an immense amount of hope and hype that the Securities and Exchange Commission (SEC) would finally approve a bitcoin ETF, with proponents pointing to how the bitcoin market has changed since 2018, the new administration and the growth of a regulated futures market.
And it turns out they were right! Sort of. A bitcoin futures ETF began trading this morning, a first for this type of product in the U.S. An actual physical bitcoin ETF still seems some time away though.
So the race to be the first to launch a bitcoin-related ETF has ended. All eyes are on whoever will be second, and whether ProShares will have a massive first-mover advantage or not. In theory, the next bitcoin futures ETF that could have launched would be Invesco, but the company announced it was pulling out late on Monday.
This leaves Valkyrie and VanEck with bitcoin futures ETFs that could launch as soon as Oct. 25, giving ProShares nearly a week to ride the initial wave of enthusiasm.
Valkyrie, at least, is moving to launch early. While the company hasn’t filed a post-effective amended prospectus as of Monday night, the firm did update its ticker, add pricing information and send initial listing information to the Bloomberg Terminal data team, all signs that it’s about ready to go.
To launch, Valkyrie would need explicit permission from the SEC, but it could follow ProShares pretty quickly if it receives that permission.
James Seyffart, an analyst with Bloomberg Intelligence, told CoinDesk that “All this started when Gensler outlined what he expected.”
When physical ETFs
What isn’t clear is if/when a physically-backed bitcoin ETF will launch. Gensler’s comments would suggest that this won’t happen anytime soon, certainly not in 2021. ETF experts on Twitter say sometime in the fourth quarter of 2022 may be a reasonable expectation. Seyffart agreed.
“I view the futures ETF as a stepping stone … I highly doubt the SEC will approve the product this year,” Seyffart said.
Companies filing for ETFs seem unconvinced. Bitwise Asset Management, which filed for a futures ETF in September, filed for a physical bitcoin ETF last week. CIO Matt Hougan said he believes the market itself is mature enough to support the product, citing data Bitwise compiled which ranks CME as the leading exchange for bitcoin price discovery.
Grayscale (a subsidiary of CoinDesk parent company Digital Currency Group) is likewise rumored* to be close to filing for a conversion of its Grayscale Bitcoin Trust to an ETF product.
Jennifer Rosenthal, the company’s communications director, confirmed the rumor in a set of tweets on Monday, saying Grayscale will move to convert as soon as the SEC “formally” expresses comfort in the bitcoin market.
“Once there’s official and verifiable evidence of the SEC’s comfort with the underlying #Bitcoin market - likely in the form of a Bitcoin Futures ETF being deemed effective - the #NYSE Arca will file a document called the 19b-4 to convert $GBTC into an ETF,” Rosenthal tweeted.
This suggests that NYSE Arca and Grayscale may file as soon as ProShares is up and running.
*Editor’s note: Grayscale literally filed as soon as ProShares was up and running on Tuesday morning.
But the timing remains curious to me. Will Gensler or the SEC staff really become more comfortable with a physical ETF within the legally mandated time frame for Bitwise or Grayscale’s filings?
The answer may not depend on the SEC’s view of market maturity at all. While maturity and market surveillance were two key issues often cited by the SEC as it rejected bitcoin ETF applications in 2018 and 2019, Gensler’s more recent comments have largely focused on investor protections.
He said he was comfortable with the investor protections enshrined in the Investment Company Act of 1940, which oversees futures ETFs, when compared to the Securities Act of 1933, which oversees the physical ETFs.
The challenge for aspiring issuers may be drawing parallels between the futures ETFs and the physical ETFs and their respective investor protection clauses.
And just a quick personal aside: Bitcoin ETF stories are how I landed in the regulatory beat, but it’s still genuinely a surprise that one launched this morning (even if it is a futures filing).
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The Biden Bunch Changing of the guard  Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated) We are back to waiting for hearings and votes.
Elsewhere 
A message from Aimedis  Aimedis - an eHealth platform based on blockchain technology, which has been developed since 2017 and released in the current version 2020 for web, iOS and Android. Aimedis combines all relevant eHealth applications such as health records, video chat with doctors, appointments, prescriptions, second opinions, wearables, medical social media communication, eLearning, a unique medical and scientific-pharmaceutical NFT marketplace, while displaying all relevant operations in a private blockchain visible and transparent for the patient.
Crypto 2022: Policy Week  What will 2022 bring? Crypto 2022 is CoinDesk’s ambitious effort to scope out what’s next. This week it's Policy Week, a week devoted to exploring the complex ways governments are interacting with the cryptocurrency ecosystem, and how policy decisions or lack thereof will affect the year ahead. Read more here.
Beyond CoinDesk 
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