Bitcoin, Crypto currency, Blockchain

Bitcoin ETF: The catalogue of demands of the SEC

The price of Bitcoin has shown itself to be very responsive when it came to announcements of exchange-traded Bitcoin Fund (Exchange Traded Fund, ETF). The expectations of such a Bitcoin ETF in the case of many crypto investors high – too high, as some people think. Nevertheless, many expect the upcoming decisions by the US stock exchange Supervisory authority SEC (Securities and Exchange Commission) on various proposals for a Bitcoin covered Fund with voltage. Most recently, the SEC has a decision on a joint effort of the Chicago options exchange CBOE (Chicago Board Options Exchange), the investment company VanEck, and the block chain, business SolidX on the 30. September adjourned. The Commission could 27, a further extension of time until. February 2019 grant. Supporters of a Bitcoin ETF should therefore be prophylactically on a Continuation of the suspended game.

What is an ETF?

Exchange-Traded Funds (exchange-traded Fund, or ETF) are an investment Fund, directly via the stock exchange and sold. You to make indices, and have over the course of the same Rate as the underlying Index. Such an Index can be, for example, the German stock index DAX. In this case the investment company would buy shares of all 30 DAX-listed companies and the DAX virtually “recreate”. So the investor can benefit from the value development of the company, without having yourself to the purchase or sale of individual shares to take care of.

Similarly, it is possible to create an ETF that represents, for example, the price of Oil. Consequently, a Bitcoin would target ETF, the Bitcoin market. So it is in the ETF application, the CBOE:

“[…] The investment objective of the trust is that the shares of value development in the price of Bitcoin, less the operating costs of the Trusts reflect.”

ETFs are typically managed passively. The stresses of the CBOE in your proposal:

“The Trust is not actively managed. He does not engage in activities that aim to achieve a profit from the price changes of Bitcoin or to reduce losses.“

This results in a cost advantage over actively-managed funds, i.e., those in which a Fund Manager assets weighted values individually and actively in the composition of the portfolio engages for investors. The fees are accordingly much lower.

Another Bonus of a Bitcoin ETF would be the fact that there spent money as a special asset counts and facing a possible bankruptcy of the Fund Manager is protected.

The catalogue of demands of the SEC

So far, succeeded, however, none of the SEC, proposals submitted for Bitcoin ETFs, to dispel the concerns of the sec entirely. Least a second start-up of the Winklevoss met-brothers in Denial. What conditions must be met for approval of a Bitcoin-based ETF, as defined by the SEC in January in a letter to Paul Stevens (Investment Company Institute), and Timothy W. Cameron (Securities Industry and Financial Markets Association).

The Commission notes in the letter, the five Central problem areas for which none of the, to date, submitted Bitcoin-ETF-proposals, satisfactory solutions could deliver.

  1. Rating: ETFs to your asset on each business day rate, to a net asset value (Net Asset Value, NAV). This can currencies given the volatility of the Crypto, the fragmentation and the lack of regulation of the underlying markets be achieved?
  2. Liquidity: ETFs have sufficient liquidity to daily return to make purchases. What measures would take the funds, to ensure that you have sufficient liquid funds to make redemptions?
  3. Custody: The Fund must have the storage of the assets. How would meet a Fund custody rules? How would a Fund, the existence, securing sole ownership rights and the functionality of Private Keys? How will cyber security threats affect the custody of assets?
  4. Arbitrage: An ETF must have a market price that is not materially different from its NAV. How will ETFs respond in the face of fragmentation, volatility, and trading volume of the cryptocurrency market? How would the volatility-based trading on a futures Arbitrage market influence? And what impact would the closure of a crypto stock exchange on him?
  5. Manipulation: crypto-currency markets have a much lower level of investor protection in securities markets, with greater opportunities for fraud and Manipulation. The ETF for a wide range of investors, including private investors,? It would also provide the investors sufficient information to understand the risks?

Expiring Deadlines

About the Failure of the Winklevoss’ETF proposal was already reported sufficiently. ETF advocates now put their hopes in the outstanding ETF proposals. The main focus is on the proposal of the CBOE, SolidX and VanEck. The CBOE proposal, however, is the only in which the funds through Bitcoins “physically” satisfied. The smallest possible investment should be 25 Bitcoin, according to the current Bitcoin price of about 140.350 Euro. Thus, the focus is clearly on institutional investors. The has calculus: SolidX CEO Daniel Gallacy justified the relatively high entry threshold that is currently still ongoing concerns of the SEC, to make ETFs for private investors:

“Based on various comments, it seems that the regulators currently have concerns in respect of an ETF, which is available to private investors. We think that this will change over time, but the current situation is a good starting point for a product that is aimed exclusively at institutional investors”,

so Gallacy to Bloomberg.

In addition to the CBOE ETF, the SEC will decide on the Request of three other applicants. So is the 23. August the verdict for ETF proposal of the ProShares due. Since it is a physical ETF, the Investments will not be invested directly in Bitcoin, it is likely that the SEC will have a decision to less pressure on the Bitcoin price. In addition, the ETF proposals of granite share and Direxion in September for Disposition. By then, it will show whether the crypto-has rubbed off on the enthusiasm of Commissioner Hester M. Pierce already on their colleagues.

More about the in September, due on the ETF proposals and how they want to be the demands of the SEC, will be announced in the coming crypto compass of BTC-ECHO.

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