Over three years ago, in 2013, the corporation of your Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the initial proposed bitcoin ETF, the Winklevoss Investment Trust, seeking to trade around the HFT-dominated BATS exchange. The SEC is predicted to make a decision onto it by March. A second group, SolidX Partners followed last July seeking SEC approval because of its bitcoin IRA rollover, SolidX Bitcoin Trust, that will 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 unique Bitcoin Investment Trust in the New York Stock Exchange: similar to the prior two attempts, the fund hopes to get SEC approval to expand the viewers to the virtual currency. Initially, the trust will attempt 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. Depending on a net asset value 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 the new filing if approved, the trust would operate as being a traditional ETF, which means that specialized traders would create and retire shares based upon demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., happen to be in discussions to offer as authorized participants, in accordance with the filing. Additionally, the fund’s trustee will be Delaware Trust Co., along with the transfer agent will be Bank of New York Mellon Corp., depending on the filing.
The objective of a bitcoin-based ETF is usually to offer an product that might be easier for investors to gain access to and would mute at least some of bitcoin’s volatility, though it would hardly eliminate all of it, which would still make it a riskier investment than the majority of ETFs.
Moreover, approval “could prove an earlier test for a way an SEC run by way of a Donald Trump appointee will greet innovations which may raise investor-protection or some other market-structure issues.” Furthermore, the advantages of being first with a major exchange could be big, assuming that bitcoin does are able 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 a number 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 concept that “digital money” contained in a server somewhere, is in any way safe (following recent dramatic breaches of your Chinese bitcoin exchange, these people have a point).
Earlier this month, Needham analyst Spencer Bogart wrote that “it appears there is significant pent-up demand in the investment public for this type of vehicle” although he conceded that “the probability of one being approved in 2017 was very low, expecting the SEC might be cautious about such a risky asset.”
Indeed, as among the lawyers who helped craft the applying for what is definitely the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he is doubtful the SEC will approve this sort of request any moment anytime soon. The critique, thanks to former Gemini general counsel David Brill, is especially relevant as his old employer’s last and final deadline to receive approval for that experimental product is on 11th March.
Though Brill is quick to indicate he is a “proponent” of the creation of bitcoin ETFs and pro-bitcoin regulation more broadly, the prognosis fails to bode well because of its success. In conversation with CoinDesk, Brill explained he believes factors such as China’s influence on the buying price of investing in bitcoin make an approval unlikely.
Specifically, he was quoted saying that “It seems unlikely, among the rest of the reasons, that this commission will probably would like to advance with a product in which the major trading is completed upon an exchanges that is probably not following our AML guidelines.” In other words, China’s domination of bitcoin trading – around 98% of recent bitcoin transactions took place in China – would likely force the SEC to deny any one 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 as the New York-based exchange’s general council, where he was quoted saying he helped create the legal infrastructure of the exchange and craft a number of responses to amendments to the S1 filing.”
Though Brill does feel that that the bitcoin ETF may ultimately be allowed to complete business with a major stock exchange, he stated the SEC will likely be unlikely to accomplish this while just as much as 95% of bitcoin transactions are completed in China.
That, in conjunction with the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, creates a much not as likely approval, he explained.
“It’s more how the overwhelming greater part of trading will not be being done in the united states, and being carried out inside an area where policies are certainly not consistent with all the rules here,” said Brill.
According to Brill, one of many big hopes for additional acceptance and continuing development of bitcoin is the one and only Donald Trump. Speaking shortly before Donald Trump’s inauguration as President, Brill said he is “cautiously optimistic with regards to a more promising environment for bitcoin companies in the foreseeable future.”
From your strictly local company perspective, he predicted Trump would likely have 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 may well be a hindrance. He concluded: “I would like to try to find out what approaches might work to really make it easier for bitcoin companies to grow over the US. Because today, it is quite difficult because every state has something different that they want.”
Ultimately, bitcoin investors may have to make do without bitcoin investment for a time, particularly when as some suspect, not simply Chinese traders, but local HFTs have got over trading from the extremely volatile product. Still, which might be a good thing: neglecting to get ETF approval will simply keep bitcoin extremely volatile, and this is why it is the darling asset of your subset of traders starved for volatility in the world where central banks have eliminated practically any daily gyrations through the equity class. Therefore, we may expect bitcoin vol just to grow, not decline, in the process making the attainment of the bitcoin “holy grail” so much more improbable.