Over 3 years ago, in 2013, the company of your Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the 1st proposed bitcoin ETF, the Winklevoss Investment Trust, planning to trade in the HFT-dominated BATS exchange. The SEC is expected to make a decision upon it by March. Another group, SolidX Partners followed last July seeking SEC approval due to its bitcoin investment trust, SolidX Bitcoin Trust, which also will be listed on the NYSE.
Then on Friday, Grayscale Investments, a unit of Barry Silbert’s Digital Currency Group filed with the SEC to list its very own Bitcoin Investment Trust about the New York City Stock Exchange: as with the last two attempts, the fund hopes to have SEC approval to expand the audience to the virtual currency. Initially, the trust will seek to launch with $500 million, the filing said, even though the target is subjected to change. At Dec. 31, it had about 1.8 million shares outstanding. According to a net asset importance of $89.39 a share, its assets under management totaled $164.2 million.
As the WSJ notes, “Grayscale’s Bitcoin Investment Trust, first launched in 2013, already trades on OTC Markets Group Inc.’s over the counter exchange, OTCQX. With the new filing if approved, the trust would operate like a traditional ETF, and therefore specialized traders would create and retire shares depending on demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., will be in discussions to offer as authorized participants, according to the filing. Additionally, the fund’s trustee will be Delaware Trust Co., as well as the transfer agent will probably be Bank of brand new York Mellon Corp., in accordance with the filing.
The purpose of a bitcoin-based ETF would be to offer an product that could be easier for investors to gain access to and would mute at the very least a few of bitcoin’s volatility, although it would hardly eliminate all of it, which may still turn it into a riskier investment than most other ETFs.
Moreover, approval “could prove a young test based on how an SEC run from a Donald Trump appointee will greet innovations which may raise investor-protection or some other market-structure issues.” Furthermore, some great benefits of being first with a major exchange might be big, assuming that bitcoin does find a way to establish itself like a viable asset class. The SPDR Gold Shares ETF launched Nov. 18, 2004, has $31 billion in assets. The iShares Gold Trust ETF launched Jan. 21, 2005, has $7.7 billion in assets. Gold, a commodity not backed by any particular government, draws investors for a few of the same reasons as bitcoin… regardless of whether many physical hard-core “gold-stacker” fans mock both the concept of a paper gold representing their physical holdings, while relentlessly ridiculing the concept that “digital money” incorporated into a server somewhere, is in any respect safe (following recent dramatic breaches of the Chinese bitcoin exchange, there is a point).
Earlier this month, Needham analyst Spencer Bogart wrote that “it appears there may be significant pent-up demand through the investment public for this sort of vehicle” although he conceded that “the probability of one being approved in 2017 was very low, expecting the SEC could be cautious about this type of risky asset.”
Indeed, among the lawyers who helped craft the application form for the purpose will be the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he is doubtful the SEC will approve this kind of request any time in the near future. The critique, courtesy of former Gemini general counsel David Brill, is extremely relevant as his old employer’s last and final deadline to obtain approval for the experimental product is on 11th March.
Though Brill is quick to point out he or she is a “proponent” of the creation of bitcoin ETFs and pro-bitcoin regulation more broadly, the prognosis will not bode well for the success. In conversation with CoinDesk, Brill explained that he believes factors such as China’s effect on the buying price of investing in bitcoin make an approval unlikely.
Specifically, he stated that “It seems unlikely, among all of the other reasons, that this commission is going to would like to advance with a product where the major trading is done upon an exchanges that will not be following our AML guidelines.” To put it differently, China’s domination of bitcoin trading – as much as 98% of recent bitcoin transactions occurred in China – would likely force the SEC to deny some of the bitcoin ETF applications.
Blame China: “a career lawyer for 20 years, Brill worked at Thompson Financial from 2003 through 2010, whenever it acquired Reuters. Just before departing Gemini a year ago, Brill worked since the The Big Apple-based exchange’s general council, where he was quoted saying he helped make the legal infrastructure of your exchange and craft a variety of responses to amendments to its S1 filing.”
Though Brill does feel that a bitcoin ETF will eventually be permitted to perform business over a major stock exchange, he was quoted saying the SEC will be unlikely to achieve this while around 95% of most bitcoin transactions are carried out in China.
That, in conjunction with the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, makes for a much not as likely approval, he said.
“It’s more that this overwhelming most of trading will not be being carried out in the united states, and being done within an area the location where the rules and regulations are not consistent with all the rules here,” said Brill.
As outlined by Brill, one of several big hopes for more acceptance and growth of bitcoin is the one and only Donald Trump. Speaking shortly before Donald Trump’s inauguration as President, Brill said he or she is “cautiously optimistic in regards to a more promising environment for bitcoin companies down the road.”
Coming from a strictly local business perspective, he predicted Trump would likely require a pro-bitcoin stance. However, considering concerns in regards to a possible “trade war” with China following Trump’s expected policies, Brill said the predominance of bitcoin trading from the nation can be quite a hindrance. He concluded: “I would like to try to view what approaches might work so it will be easier for bitcoin companies to expand across the US. Because right now, it is rather difficult because every state has something different which they want.”
Ultimately, bitcoin investors might have to make do without smartbitcoininvestments for some time, especially if as some suspect, not merely Chinese traders, but local HFTs have got over trading of your extremely volatile product. Still, that could be a very good thing: neglecting to get ETF approval will surely keep bitcoin extremely volatile, and this is why it has become the darling asset of your subset of traders starved for volatility within a world where central banks have eliminated virtually any daily gyrations from the equity class. As such, we may expect bitcoin vol to simply grow, not decline, at the same time making the attainment of the bitcoin “holy grail” much more improbable.