Over 3 years ago, in 2013, the organization from the Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the first proposed bitcoin ETF, the Winklevoss Investment Trust, looking to trade around the HFT-dominated BATS exchange. The SEC is anticipated to make a decision onto it by March. A second group, SolidX Partners followed last July seeking SEC approval due to its bitcoin investment trust, SolidX Bitcoin Trust, that also will be listed 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 very own Bitcoin Investment Trust in the Ny Stock Exchange: just like the last two attempts, the fund hopes to acquire SEC approval to grow the viewers for the virtual currency. Initially, the trust will attempt to launch with $500 million, the filing said, although the target is at the mercy of change. At Dec. 31, it had about 1.8 million shares outstanding. Based upon a net asset value of $89.39 a share, its assets under management totaled $164.2 million.
Because 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 being a traditional ETF, which means that specialized traders would create and retire shares depending on demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., happen to be in discussions to serve as authorized participants, according to the filing. Additionally, the fund’s trustee is going to be Delaware Trust Co., as well as the transfer agent will probably be Bank of the latest York Mellon Corp., in accordance with the filing.
The aim of a bitcoin-based ETF would be to provide an product that might be easier for investors gain access to and would mute at least some of bitcoin’s volatility, though it would hardly eliminate everything, which will still make it a riskier investment than most other ETFs.
More importantly, approval “could prove an early test for a way an SEC run from a Donald Trump appointee will greet innovations that could raise investor-protection or other market-structure issues.” Furthermore, the benefits of being first on a major exchange could possibly be big, assuming that bitcoin does have the ability to establish itself as 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 concept of a paper gold representing their physical holdings, while relentlessly ridiculing the idea that “digital money” contained in a server somewhere, is at all safe (following recent dramatic breaches of your Chinese bitcoin exchange, they have a point).
Earlier this month, Needham analyst Spencer Bogart wrote that “it appears there is significant pent-up demand from your investment public for this sort of vehicle” although he conceded that “the probability of one being approved in 2017 was suprisingly low, expecting the SEC could possibly be cautious about this sort of risky asset.”
Indeed, as among the lawyers who helped craft the applying for the purpose is the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he or she is doubtful the SEC will approve such a request any moment in the future. The critique, thanks to former Gemini general counsel David Brill, is specially relevant as his old employer’s last and final deadline to obtain approval for that experimental item is on 11th March.
Though Brill is quick to point out 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 which he believes factors including China’s impact on the cost of invest in bitcoin make an approval unlikely.
Specifically, he stated that “It seems unlikely, among the rest of the reasons, the commission is going to want to progress using a product where the major trading is performed with an exchanges that will not be following our AML guidelines.” In other words, China’s domination of bitcoin trading – up to 98% of recent bitcoin transactions happened 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, whenever it acquired Reuters. Just before departing Gemini this past year, Brill worked since the New York City-based exchange’s general council, where he said he helped create the legal infrastructure from the exchange and craft several responses to amendments to its S1 filing.”
Though Brill does think that that a bitcoin ETF may ultimately be allowed to accomplish business on the major stock exchange, he stated the SEC will probably be unlikely to do this while up to 95% of bitcoin transactions are carried out in China.
That, in addition to the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, provides a much more unlikely approval, he was quoted saying.
“It’s more the overwhelming largest part of trading is just not being carried out in the usa, and being carried out in an area where rules and regulations usually are not consistent with all the rules here,” said Brill.
In accordance with Brill, one of many big hopes for even more acceptance and expansion 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 about a more promising environment for bitcoin companies in the future.”
From a strictly small business perspective, he predicted Trump would likely go on a pro-bitcoin stance. However, considering concerns regarding a possible “trade war” with China following Trump’s expected policies, Brill said the predominance of bitcoin trading inside the nation might be 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 throughout the US. Because today, it is very difficult because every state has something different that they want.”
Ultimately, bitcoin investors may need to make do without invest online for a while, especially if as some suspect, not just Chinese traders, but local HFTs took over trading of your extremely volatile product. Still, that could be a very important thing: failing to get ETF approval will simply keep bitcoin extremely volatile, that is also why it is the darling asset of a subset of traders starved for volatility in a world where central banks have eliminated virtually any daily gyrations from your equity class. As a result, we might expect bitcoin vol to only grow, not decline, along the way making the attainment of your bitcoin “holy grail” very much more improbable.