US SEC Chairman: Bitcoin ETF may become a reality

An ETF is usually called a trading open-end index fund, and is also usually called an Exchange Traded Fund (Exchange Traded Fund, referred to as ETF). It is an open-end fund listed and traded on an exchange with variable fund shares. , It is a very popular financial derivative in the traditional financial market. For a growing investment market like Bitcoin, the future market development space for ETFs is huge. The so-called Bitcoin ETF is a very common investment channel, which is the management of special assets that track the Bitcoin price index. The biggest advantage of ETF is that it allows investors to hold digital currencies in a simpler way, without having to go through the complicated process of buying a single or multiple currencies. Purchasing a Bitcoin ETF is equivalent to indirect investment in Bitcoin. In addition, since ETF holders do not need to hold Bitcoin itself, there is no need to worry about the storage and security issues of digital assets.

1. The road to Bitcoin ETF application 

On June 30, 2016, the Bats BZX exchange submitted a rule change application to the SEC, which will enable it to trade shares of Winklevoss Bitcoin Trust. If approved, the Winklevoss twin ETF will be the first Bitcoin BTF to enter a fully regulated stock exchange and obtain a license. In this way, ordinary investors can directly access Bitcoin without having to actually hold cryptocurrencies or laboriously learn how to operate cryptocurrency exchanges or wallets.

There is no doubt that this is a big step in the process of mainstreaming cryptocurrency. However, after a long period of negotiation, the SEC still rejected the application for rule changes. On March 10, 2017, the agency issued a statement to explain the reasons behind the decision. The main reason was to prevent market manipulation and fraud.

Only two weeks after this decision was issued, the SEC rejected a similar application submitted by NYSE Arca, which is owned by the Intercontinental Exchange and hopes to launch the SolidX Bitcoin Trust ETF. In the new statement, the agency repeated a lot of previous content, claiming that “the application does not comply with Article 6(b)(5) of the Exchange Act. According to the Act, the National Stock Exchange must formulate relevant rules to prevent Fraud and market manipulation”.

The above deeds fully show that 2017 is by no means a friendly year for Bitcoin ETFs, and exchanges should also eliminate the SEC’s approval of an ETF application that year. In fact, in addition to SolidX and Winklevoss, Barry Silbert’s Grayscale Investments also registered an ETF application with the SEC in January 2017. Of course, the results of the application were not better than its competitors. The decision on the application was postponed to March 22 of that year. The three previous public comments on the application were all negative. After that, the company withdrew its ETF application in September of the same year, and cited the lack of “regulatory progress” in the crypto market as the main reason.

Between March and September 2017, the public provided some additional comments to the SEC. Although the total number of comments was only 21, some of them did provide insight into Grayscale Investments’ application and deeply revealed why the company’s ETF application could not be approved at that time.

US SEC Chairman: Bitcoin ETF may become a reality

. Bitcoin ETF may soon become a reality

Gary Gensler, chairman of the US Securities and Exchange Commission, hinted at a way to approve the establishment of a Bitcoin ETF, stating that ETFs that comply with the SEC’s strict rules on mutual funds can provide investors with the necessary protection.

Under the leadership of Gensler and former chairman Jay Clayton, the SEC has repeatedly refused to approve cryptocurrency ETFs, worrying about the transparency and manipulation risks of the Bitcoin spot market.

Most pending ETF applications are filed under the laws that allowed products to be listed on stock exchanges in the 1930s. Gensler hinted that he would like to see an ETF application submitted under the Mutual Fund Management Regulations of 1940. The difference between the two is not just academic. Lawyers say that mutual fund laws provide much stronger protections for investors and require fund boards to closely monitor these investments.

At least 6 Bitcoin ETF applications have been submitted to the SEC. Gensler said in his speech that although he is interested in blockchain technology and believes that cryptocurrency has potential value, he plans to actively protect investors in this field.

Gensler also expressed this concern in an exclusive interview with Bloomberg Businessweek. He said in an interview that when formulating a regulatory framework, there will be no compromises in protecting investors.

US SEC Chairman: Bitcoin ETF may become a reality

.  Conclusion 

A successful Bitcoin ETF application will lower the threshold for Bitcoin transactions, bring a lot of funds to the Bitcoin transaction market, accelerate the development of the cryptocurrency industry, and promote asset custody to a certain extent. It is also equivalent to telling the public that the government has officially recognized Bitcoin as a legal asset class, changing people’s overall view of cryptocurrency regulatory risks, which will accelerate the public’s acceptance of cryptocurrencies represented by Bitcoin.


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