First Trust Submits ‘Buffer’ Crypto ETF to SEC as Gensler Reconsiders Approach

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Illinois-based financial services firm First Trust has formally submitted Form N1-A to the US Securities and Exchange Commission (SEC), notifying the agency of its intentions to launch a crypto-backed exchange-traded fund (ETF).

According to the prospectus submitted to the SEC on December 14, the ETF would be called First Trust Bitcoin Buffer ETF and will not be a spot Bitcoin ETF.

Explaining the rationale behind this decision, First Trust revealed that the Fund would participate in the positive price returns (before fees and expenses) of the Grayscale Bitcoin Trust or other ETF-backed crypto product that provides access to the performance of the foremost crypto asset.

Providing more details on the ‘buffer’ tag of its Bitcoin ETF application, the firm explained that the ETF would serve as a cushion against the initial 30% of the underlying exchange-traded product (ETP) losses over a target outcome period.

A buffer ETF, also known as “defined-outcome ETFs,” differs from traditional ETF products by offering investors a determined investment outcome while imposing limits on a stock’s growth to protect against market losses.

While other ETF applicants such as BlackRock, Grayscale, Fidelity, and others pursue the spot Bitcoin ETF route, First Trust is setting the pace with its crypto-backed buffer service.

Expect to See Other Entrants After First Trust


In its 32-year record as a financial services firm, First Trust has focused on issuing ETF products and other financial services like investment trusts and mutual funds.

The institution’s recent interest in a Bitcoin ETF represents another significant move by a legacy financial institution in the crypto market.

Bloomberg’s ETF analyst James Seyffart has since reacted to the First Trust Bitcoin Buffer ETF, labeling it a unique strategy in a two-year walkaround dance with the Gary Gensler-led securities agency.

Seyffart also stated that he expects more Bitcoin ETF applicants to go the First Trust route in the coming weeks.

Meanwhile, Gary Gensler has revealed that the SEC is taking a “new look” at Bitcoin ETF filings following the District of Columbia court intervention. The SEC Chair mentioned that there are currently 10 to 12 spot Bitcoin ETF applications being reviewed by the SEC.

The former MIT blockchain professor also added that the SEC is evaluating every application before giving the nod to a spot Bitcoin ETF.

A spot Bitcoin ETF approval is expected between January 10 and 15, 2024, according to James Seyffart.

Additionally, asset management firm BlackRock submitted an in-kind “prepay” redemption model to the SEC for its spot Bitcoin ETF application on November 28.

According to BlackRock, this new model will make it easier for traditional financial institutions to hold Bitcoin on their balance sheets and for shareholders to buy its shares using traditional fiat currencies.

The model is also expected to provide “superior resistance to market manipulation,” which has been a major concern with the SEC in recent years.

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