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Since the SEC is delaying Bitcoin ETFs, there are other options for investors

Thiago Prudencio | LightRakete | Getty Images

With the U.S. Securities and Exchange Commission postponing approval of Bitcoin exchange-traded funds, some companies are looking into other ways to meet growing investor demand for cryptocurrency.

The SEC on Wednesday made another decision regarding Van Eck’s Bitcoin ETF, extending its review and seeking feedback on the proposed rule change, the filing said.

“The SEC has not been ready to approve a Bitcoin ETF for several years,” said Timothy Massad, a research fellow at Harvard University’s Kennedy School of Government. “So this latest move is in line with that.”

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SEC chairman Gary Gensler called for tighter regulation of cryptocurrency exchanges in May, citing the need for greater investor protection.

“The market has grown, but we are still missing some basic standards that we have in the security area and that are being imposed on the stock exchanges,” said Massad.

With no oversight over cryptocurrency exchanges, the SEC fears investors could be vulnerable to fraud and market manipulation, he said. However, Congress has not created a regulatory framework.

The SEC did not respond to CNBC’s request for comment.

Demand for Bitcoin Products

While it may be a while before the SEC gives Bitcoin ETFs the green light, other crypto-related funds are popping up in the meantime.

For example, Invesco has requested the publication of two crypto-linked ETFs: the Invesco Galaxy Blockchain Economy ETF and the Invesco Galaxy Crypto Economy ETF.

Instead of investing directly in Bitcoin or cryptocurrency, these ETFs invest in digital currency-related stocks like mining and technology companies.

Another option, the Bitwise Crypto Industry Innovators ETF, which tracks an index of crypto-neighboring companies, was launched in May.

“You can buy bitcoin or buy some of the companies that are helping the bitcoin economy,” said certified financial planner Ivory Johnson, founder of Delancey Wealth Management in Washington.

While these crypto-related ETFs tend to be less volatile than digital assets, there isn’t as much upside potential, he said.

“It’s not much different than buying a healthcare ETF,” said Johnson. “Someone may buy the pharmaceutical or biotechnological part that is riskier.”

Buyers can also turn to the Grayscale Bitcoin Trust, an investment that holds Bitcoin, with limited units for sale. Daily placements are available to so-called accredited investors who meet the income, wealth and experience requirements. The trust has a minimum purchase of $ 50,000 and an annual fee of 2%.

Everyday investors can buy the asset through regular stock exchanges, but may encounter price fluctuations as the stocks trade at a discount or a premium.

Grayscale is committed to converting the trust into an ETF and making it available to more investors when regulators are ready.

“The ETF would be fantastic because you can cut your fees and return more shares,” said Johnson.

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