The United States Securities and Exchange Commission (SEC) on Tuesday delayed its decision regarding the approval of a bitcoin exchange-traded fund (ETF) put forward by Bitwise. The proposal was first filed at the beginning of this year and in March the regulatory body had pushed its decision on Bitwise‘s and VanEck/SolidX proposals till May.

The latest delay in the decision can be seen in the hindsight of the bull-run that is being witnessed right now in the crypto world but it is not a complete buzz killer. At the time of writing, bitcoin is still floating around the highs that it gained over the past few weeks. It is fluctuating around the $8k mark and has already attracted a lot of attention from the global financial world. Although the decision by SEC has not directly influenced bitcoin’s price significantly, it remains to be seen how its ripples spread out. It is largely expressed by many experts in the crypto game that it is only a matter of time before a crypto ETF gets approved. Last year, when an ETF proposal by the Winklevoss twins was dismissed by the SEC, one of its commissioners, Hester M. Peirce, showed her dissent, stating:

“The Commission’s mission historically has been, and should continue to be, to ensure that investors have the information they need to make intelligent investment decisions and that the rules of the exchange are designed to provide transparency and prevent manipulation as market participants interact with each other. The Commission steps beyond this limited role when it focuses instead on the quality and characteristics of the markets underlying a product that an exchange seeks to list”.

READ ALSO: SEC’s Commissioner Shows Dissent on the Rejection of Bitcoin ETF Proposal

So what is the buzz around this crypto-linked ETF and how is it significant?

A crypto-linked exchange-traded fund is expected to provide the institutional investors wanting to enter the crypto game with a secondary layer to play with. Hitherto, there is a clear lack of regulation in the crypto space. Owing to this shortcoming, the number of scams, illegal activities and frauds linked to the cryptocurrencies is extremely large. This is why institutional investors do not want to directly get in touch with this ‘dirty’ space. But with a crypto-linked ETF in place, a passageway will be provided to the institutions to enter this space without getting directly involved with cryptos. As a result of this, a large amount of institutional money which has been sitting on the sidelines is expected to flow into the cryptocurrency world, taking its market capitalization to new highs. This will also bring along more stability and credibility to the volatile world of crypto. This inflow of institutional capital is also expected to take prices of various cryptos to their new heights.

READ ALSO: Did SEC & CFTC Suggest a Self-Regulated DAO for Crypto Industry?

As of now, the market capitalization of bitcoin is very small, around $140 billion, as compared to the trillion dollar market caps of big financial institutions. Big whales of the market take advantage of this small market cap by using pump-and-dump strategies to artificially manipulate bitcoin’s price. As institutions enter this space and market cap hits trillions, it is likely that whales will be rendered far less potent than they are now to manipulate price. Despite all the benefits that are supposed to come with the establishment of a crypto-linked ETF, one can ask why the SEC has not approved it yet. The answer in a simple word would be… immaturity.

It has just been over a decade since bitcoin emerged on the financial scene. Although it emerged as a new form of global currency challenging the centuries-old banking system, it’s initial use-case was largely driven by its usage in illegal marketplaces such as the dark web. Being decentralized, there is no central party overlooking the activities which make it easier for this asset to be used in illegal activities such as money laundering. Besides, the price of bitcoin has always been volatile as well.

READ ALSO: Technology Behind Bitcoin Needs to Be Understood Before CFTC and SEC Place Regulations

One day the asset is booming and the very next day it is down in the dust. The recent spike in price shows just how volatile bitcoin is in nature. Then comes the issue of custody. Millions of dollars are being moved around and the problem of custody is something that needs to be solved through official means. Since the technology is still developing and the legislative front is also incomplete, there aren’t many concrete regulatory frameworks surrounding this space. So some of the major problems that hold back the approval of a bitcoin ETF include the problems linked to liquidity, custody, arbitrage, price manipulation and risk associated with this uncertain space. The biggest challenge for the SEC is to ensure the security of its investors and to provide enough free space to cryptos to continue on with its innovation. Unless security of the investors is not ensured, it is unlikely that the SEC will approve an ETF.

Experts have varying views about a crypto-linked ETF. Here are a few of them from the past:

The ETF is a great tool for institutional clients, which allows you to use crypto-actives for trading, but does not provide those benefits that are incorporated in the cryptocurrency. The ETF won’t raise the market caps since it is a derivative and that is a separate market. – Founder and Chief Executive Officer of Aximetria

READ ALSO: Here’s Why There’ll be no Bitcoin ETF in Six Months

“Having a crypto linked ETF would bring institutional legitimacy and liquidity. Exchange traded funds need to be approved by the SEC, and so far the SEC has been hesitant due to rampant price manipulation. Approval would mean that this hurdle was addressed, encouraging institutional players like banks to create markets and get involved in the market. Larger institutional investors need increased liquidity in the crypto markets to be able to trade meaningfully. As more institutional players jump in, more retail (individuals) would likely follow suit. Overall it would be a boon for market activity in cryptocurrencies. – Anna Yen, Equity Derivatives Expert “

The approval of a bitcoin-backed ETF will likely boost the price of BTC (and as a result other crypto assets) if history serves as any guide. The launch of gold-backed ETFs in the early 2000s granted a wider investor base access to the yellow metal. The increased demand for these products and the broad weakness in the US Dollar helped spur the multi-year run up in gold prices from ~2002-2011. – Co-founder Delphi Digital, Kevin Kelly

An ETF is seen as a positive move for the crypto world. However, it remains to be seen when it gets established.

READ ALSO: Bitcoin, Cryptocurrency & Blockchain ETF (Exchange Traded Funds)