The matter of Bitcoin ETFs is still in the air and has been ever since VanEck and SolidX withdrew their proposal, which was believed to be the most promising one. However, the SEC is now back at work, and according to recent reports, the US regulator is reviewing three Bitcoin ETFs, one of which was filed only last week. Further, the SEC Commissioner stated recently that the time is finally right for Bitcoin ETFs, and the decision regarding one of them should be brought at some point next week.
Are Bitcoin ETFs finally arriving?
Two days ago, this Monday, The SEC Commissioner Hester Peirce attended the Consensus 2019 conference in New York, where she spoke of the regulatory environment for the ETFs awaiting approval. While Peirce is known as a big supporter of crypto, her words still brought excitement into the crypto community.
Peirce stated that she is dissatisfied with current laws, and said that the SEC should increase their efforts to come up with a regulatory framework for digital currencies. She believed that the time of cryptocurrencies had arrived a long time ago, and that time is certainly right for the ETFs to arrive now. Of course, there are still questions to be answered, and she encouraged the audience to contact the SEC and provide a better understanding of the market. She particularly pointed out issues such as market manipulation and custody, as the most controversial topics.
Peirce held another speech earlier this month, at the Securities Enforcement Forum on May 9th. During the speech, she pointed out many of the same problems. One issue mentioned was the fact that securities laws do not stop operating whenever a new industry emerges, which is why it falls upon the industry to find a way to adapt or risk becoming the subject of an enforcement action. With that in mind, Peirce believes that it is the regulator’s duty to provide clear guidance regarding what needs to be done in order for the industry to be in full compliance.
Another problem that Peirce had mentioned is a concern that the US is falling behind other countries, which are more open-minded and willing to accept change. She noted that the US has often been a bad place for bringing innovation and that the current activities might find it better to move offshore.
SEC Commissioner Hester Pierce at #Consensus2019: “Our country has always been a country where innovation can really thrive. I worry that a lot of the activities are now happening offshore. I want the US to be the market for innovation.” pic.twitter.com/qjICffQr1x
— Leo Cheng (@leokcheng) May 13, 2019
The SEC does try to bring some guidance, as proved by a recent 14-page document that brought details of a framework which should assist issuers with conducting a Howey analysis. While the document is nowhere near being the final solution, it can at least allow issuers to evaluate whether coin offerings are securities or not. But, Peirce believes that it is likely that the document will bring more questions than answers.
Additional issues regarding the SEC decisions are present as well, such as the possibility of hurting innovation by bringing too excessive regulations.
Meanwhile, Valerie Szczepanik, the regulator’s Senior Advisor for Digital Assets and Innovation, believes that it is necessary for the SEC to move slowly, as there is a large need for caution.
SEC top #crypto advisor Valerie Szczepanik said agency is moving slowly on cryptocurrency regs and #cryptocurrency-based products because it needs to be cautious. But the agency has welcomed those launching crypto projects to give input and seek advice. #Consensus2019
— David G Zeiler ⚡️ (@DavidGZeiler) May 13, 2019
Then, there is Chairman Jay Clayton, who recently held a speech at the SEC Sparks Conference, stating that one of the areas that the regulator is focusing on because of massive risks includes digital assets, including cryptos, coins, and tokens. He also reminded everyone that he mentioned some areas that need to be upgraded before ETFs can arrive, including safe custody, and market surveillance.
Proposal 1: Bitwise Bitcoin ETF Trust
Among the three ETF proposals mentioned earlier, there is one by Bitwise Bitcoin ETF Trust and filed by NYSE Arca Inc. This proposal was filed in late January of this year, and in March, the SEC announced that it would make its decision on May 16th, which is tomorrow. However, due to the rules were changed on May 7th, when the exchange filed Amendment No. 1, which replaced the original one entirely.
The company stated that the trust will hold BTC, and will store it in custody at a regulated third-party custodian. Further, it will not use derivatives that may expose the trust to credit risks. The exchange also points out that the trust will not purchase or sell BTC directly. BTC will simply be delivered to the trust in exchange for the trust’s shares, and vice versa.
The shares will also be valued daily, based on the prices from crypto exchanges, in order to ensure that the shares will truly reflect the actual worth of BTC. Ten exchanges will be used for this purpose. Bitwise clarified that the settlement pricing methodology would mirror one of CME futures, and the exchanges which will be used for determining the BTC price will be Binance, Bitflyer, Bittrex, Bitfinex, Bitstamp, Gemini. Coinbase Pro, Kraken, Poloniex, and Itbit. Due to the changes, the SEC had given up on the May 16th deadline, deciding that the new one is August 14th, with the possibility of another delay, which would put the final deadline of October 13th.
Proposal 2: The return of VanEck and SolidX
Next, there is VanEck SolidX Bitcoin ETF proposal, which was filed last year, and then withdrawn during the US government shutdown, early in 2019. The companies decided to withdraw the proposal themselves, instead of having it rejected by the remaining SEC executives, just so that they would prevent it from gaining approval by default.
The proposal was then re-filed on January 30th, and it got published in the Federal Register around 20 days later. The deadline for the decision is currently May 21st, which is in about one week. So far, there are only around 24 comments for the new rule change, while the previous filing received around 1,600.
The trust’s sponsor will be SolidX, while the trustee will be Delaware Trust Company. Meanwhile, the transfer agent and the administrator role will go to the Bank of New York Mellon, which will also be the custodian.
Proposal 3: The newly-filed one
Finally, there is the third and final proposal that the SEC is reviewing right now, which comes from the US Commodity Index Funds Trust. The firm filed a registration statement last Thursday, for Cresent Crypto Index Fund, while being sponsored by the USCF. It is to be traded on the NYSE Arca stock exchange, and its symbol is to be XBET.
The index plans to track the market cap performance of BTC and ETH, and it will be based on various inputs which might include third-party exchanges and markets that will provide price data. Both the fund and the trust will be controlled and managed by USCF, a commodity pool operator with the CFTC, and a member of the National Futures Association.
The rest is up to SEC, which has the right to extend the time to make ETF-based decisions up to 240 days from the date of its publication in the Federal Register. Unless the SEC reaches the decision within this time, the requests will be approved by default.