ANALYSIS: Gensler Problematically Applies 40 Act to Bitcoin ETFs

Last Tuesday I called attention to the overlooked relevance of the Investment Company Act of 1940 (the 40 Act) to the emerging issues of decentralized finance (DeFi) and crypto lending. Little did I know that the next day, SEC Chair Gary Gensler would cite the importance of the 40 Act to a years-old issue in crypto finance: SEC approval of exchange-traded funds (ETFs) investing in Bitcoin.

Gensler’s Sept. 29 statement reiterated brief remarks made at the Aug. 3 Aspen Security Forum. Those remarks generated considerable commentary and, moreover, applications for SEC approval of Bitcoin-based ETFs. “Immediately impactful” would be an ...