New Bitcoin ETF application sent to SEC

Bitcoin ETFs have been proposed before, not least by the Facebook twins, Gemini exchange founders the Winklevoss brothers. In the past, the Securities and Exchange Commission (SEC), the US body responsible for regulating the securities markets, has denied permission for bitcoin ETFs. In March 2017, when the Winklevoss COIN ETF was denied, markets flash-crashed from $1,350 down to $980 in just seconds, before recovering. (The news did not halt the stellar bull run.)

The SEC’s reasons for denying that ETF were as follows: ‘First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.’ Since bitcoin’s chief markets were opaque and unregulated, there was scope for the ETF to be used in the course of money laundering, terrorist financing and so on.

In December 2017, Cboe — the Chicago Board Options Exchange, the world’s largest futures exchange — were allowed to introduce bitcoin futures after failing in their own ETF bids. These futures enabled ordinary retail traders to bet against bitcoin. (They were controversial, and some critics have blamed them for the dramatic fall in the price of BTC, which topped out the same day they were launched.) This represented another step along the way to mainstreaming bitcoin. However, futures are merely paper contracts; no bitcoins are bought or sold in the course of their use.

Cboe has now filed for a Bitcoin ETF with the SEC. This would enable regular investors to buy and sell real bitcoin without having to manage a wallet or register with a crypto exchange. The Cboe’s filing stated that they would only buy/sell BTC on behalf of investors. The fund would trade bitcoin using the OTC markets, without leverage. Buying bitcoin OTC makes it a lot easier to trace, especially if you’re working directly with miners. Funds will also be insured against hacking and theft.

The consensus is that this ETF — Cboe’s third attempt — might actually have a shot at approval. The landscape is very different to even a year ago, with clearer regulatory frameworks and other jurisdictions, notably Japan, leading the way in crypto adoption. If the US doesn’t approve an ETF, someone else will soon enough. America risks being left behind if it doesn’t start taking a more pro-active approach.

If the ETF passes, it will launch in the first quarter of 2019. That could place significant real demand on the market from retail investors, which could lead to impressive fireworks. Stay tuned.

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