According to the news Coinbase, one of the biggest crypto currency exchanges, is currently looking to create an exchange-traded product tied to crypto market. Back in March the company already announced an index fund of cryptocurrencies aimed at accredited investors, but an ETFis geared toward more mainstream investors. According to Businessinsider.com,Coinbasehas held talks with members of BlackRock’sblockchain working group “to tap into the firm’s expertise at launching exchange-traded products”.
However, the Securities and Exchange Commission already blocked several bitcoin ETFs from different companies, ProShares among them. This shows how tough the task could be, even for matured financial professionals, to launch a crypto ETF in the US. But let’s look into this in more details as most of the sites are only based on the headline news.
The SEC’s reasons for rejecting bitcoin ETFs were similar but legitimate in all the cases. For more details check the one disapproving ETFs meant to be tradable atNYSE Arca here. The regulator aims to prevent fraudulent and manipulative acts and practices. In order to achieve thistheSEC requires surveillance-sharing with a regulated market of “significant size” related to bitcoin, and let’s be honest here,bitcoin futures marketsare still far away from this “significant size”:
- The bitcoin futures market has limited trading history
- Therefore there is missing operational experience of the exchanges
- Bitcoinfutures are less liquid as traditional commodity futures markets
- The underlying bitcoin market is extremely volatile with frequent liquidity gaps
- Cryptocurrenciesare still facing the risk of potential regulatory/legislative changes
However the Commission said late August it will review those decisions by its staff to block nine bitcoin-based exchange-traded funds from coming to market. The reason may be that one of the four commissioners, Hester M Pierce,dissented from the Commission’s order disapproving to list and trade shares of the WinklevossBitcoin Trust on Bats BZX Exchange, Inc.She stated that more institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order.
And she may get a helping hand soon from EladRoisman, the newly-appointed member of the Securities and Exchange Commission (SEC). Many say he could be the missing the piece in tilting the balance in favour of a bitcoin ETF approval. He already hint that there could bring the change when he spoke at a Senate Banking Committee hearing earlier this year where he indirectly challenged the regulators to act in a “fair and transparent manner” – full text of his opening statement you can find here. But what gives the most hope for bitcoin investors is the following part:
“The SEC must examine and re-examine its rules, regulations, and guidelines to ensure that they are still working as intended to accomplish the SEC’s mission. This is most recently manifested in areas such as data protection and cybersecurity as well as the emergence of new investments and technologies such as initial coin offerings and blockchain.”
It seems that these developments are pointing to a major change in the regulatory front, which can mean a new milestone for investors and traders of the bitcoin as well as the whole crypto space.