Over three years ago, in 2013, the business from the Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the 1st proposed bitcoin ETF, the Winklevoss Investment Trust, seeking to trade on the HFT-dominated BATS exchange. The SEC is anticipated to make a decision upon it by March. A second group, SolidX Partners followed last July seeking SEC approval due to its bitcoin 401k, SolidX Bitcoin Trust, which would be on the NYSE.
Then on Friday, Grayscale Investments, a unit of Barry Silbert’s Digital Currency Group filed with all the SEC to list out its own Bitcoin Investment Trust on the The Big Apple Stock Exchange: just like the previous two attempts, the fund hopes to acquire SEC approval to grow the audience for that virtual currency. Initially, the trust will seek to launch with $500 million, the filing said, even though the target is at the mercy of change. At Dec. 31, it had about 1.8 million shares outstanding. Depending on a net asset worth of $89.39 a share, its assets under management totaled $164.2 million.
Since 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 all the new filing if approved, the trust would operate as a traditional ETF, and therefore specialized traders would create and retire shares according to demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., are in discussions to provide as authorized participants, based on the filing. Additionally, the fund’s trustee will probably be Delaware Trust Co., along with the transfer agent is going to be Bank of the latest York Mellon Corp., in line with the filing.
The goal of a bitcoin-based ETF is to present an product that could be easier for investors to access and would mute at the very least a number 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 an early test for a way an SEC run with a Donald Trump appointee will greet innovations which could raise investor-protection or some other market-structure issues.” Furthermore, the advantages of being first on a major exchange may be big, assuming that bitcoin does find a way to establish itself as being 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 several of the same reasons as bitcoin… even if many physical hard-core “gold-stacker” fans mock both the very idea of a paper gold representing their physical holdings, while relentlessly ridiculing the concept that “digital money” found in a server somewhere, is by any means safe (following recent dramatic breaches of any Chinese bitcoin exchange, there is a point).
Earlier this month, Needham analyst Spencer Bogart wrote that “it appears there is certainly significant pent-up demand from your investment public for this kind of vehicle” although he conceded that “the chance of one being approved in 2017 was extremely low, expecting the SEC might be cautious about this sort of risky asset.”
Indeed, among the lawyers who helped craft the application form for which will be the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he is doubtful the SEC will approve this kind of request at any time anytime soon. The critique, courtesy of former Gemini general counsel David Brill, is specially relevant as his old employer’s last and final deadline to get approval for the experimental item is on 11th March.
Though Brill is quick to indicate he or she is a “proponent” of the development of bitcoin ETFs and pro-bitcoin regulation more broadly, the prognosis will not bode well due to its success. In conversation with CoinDesk, Brill explained he believes factors for example China’s impact on the price tag on investing in bitcoin make an approval unlikely.
Specifically, he explained that “It seems unlikely, among all of those other reasons, the commission will almost certainly wish to move forward using a product where major trading is done on an exchanges that might not be following our AML guidelines.” Put simply, China’s domination of bitcoin trading – around 98% of recent bitcoin transactions occurred in China – would likely force the SEC to deny any of the bitcoin ETF applications.
Blame China: “a career lawyer for 25 years, Brill worked at Thompson Financial from 2003 through 2010, if it acquired Reuters. Prior to departing Gemini just last year, Brill worked as the New York City-based exchange’s general council, where he stated he helped make the legal infrastructure of the exchange and craft a number of responses to amendments to the S1 filing.”
Though Brill does believe that which a bitcoin ETF may ultimately be allowed to accomplish business on a major stock exchange, he was quoted saying the SEC will probably be unlikely to achieve this while as much as 95% of all bitcoin transactions are completed in China.
That, in addition to the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, makes for a level less likely approval, he was quoted saying.
“It’s more the overwhelming majority of trading is just not being done in the usa, and being carried out in an area the location where the regulations and rules are certainly not consistent using the rules here,” said Brill.
Based on Brill, one of several big hopes for additional acceptance and growth of bitcoin is none other than Donald Trump. Speaking shortly before Donald Trump’s inauguration as President, Brill said he is “cautiously optimistic regarding a more promising environment for bitcoin companies in the foreseeable future.”
From the strictly local company perspective, he predicted Trump would likely go on 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 inside the nation may well be a hindrance. He concluded: “I consider to find out what approaches might work to make it easier for bitcoin companies to grow over the US. Because at the moment, it is quite difficult because every state has something different which they want.”
Ultimately, bitcoin investors might have to make do without smartbitcoininvestments.com for a while, particularly if as some suspect, not merely Chinese traders, but local HFTs have taken over trading of the extremely volatile product. Still, which might be a good thing: neglecting to get ETF approval will surely keep bitcoin extremely volatile, and this is why it is now the darling asset of your subset of traders starved for volatility inside a world where central banks have eliminated virtually any daily gyrations through the equity class. As a result, we might expect bitcoin vol to only grow, not decline, in the process making the attainment in the bitcoin “holy grail” so much more improbable.