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Kristina Frunze

25 October 2018

Regulation Exchanges

VanEck Presents 5 Reasons for Approval of its Bitcoin ETF to SEC

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VanEck along with the SolidX and CBOE representatives laid out 5 key reasons why the SEC should consider approving their Bitcoin ETF proposals.

25 October 2018 – During the meeting with the US Securities and Exchange Commission (SEC) commissioner Elad L. Roisman, representatives from SolidX, VanEck, and CBOE outlined five key reasons why the commission should approve the Bitcoin exchange-traded fund (ETF) filing of VanEck and SolidX.

5 Reasons why SEC Might Approve Bitcoin ETFs

VanEck is an investment management firm with headquarters in New York. The firm has decades of experience in the traditional finance sector and numerous ETFs filed under its name. VanEck has presented the following points to the SEC, asking the authority to consider these in approving its Bitcoin ETF.

  • There now exists a substantial regulated derivatives market for Bitcoin;
  • Relevant markets are regulated. These include CBOE, bitcoin futures, OTC desks;
  • Worries concerning price manipulation have eased, consistent with approval of prior commodity-based ETPs;
  • CBOE’s rules are created to surveil for potential manipulation of Trust shares
  • Encourages investor protection

SEC Strict Stance Regarding Bitcoin ETFs

Earlier this year, the SEC rejected the Winklevoss Bitcoin ETF mostly due to its reliance on a cryptocurrency exchange on Gemini in order to find the base price of BTC. The SEC perceived cryptocurrency exchanges to be improperly regulated and liquid to manage an ETF. 

As a reaction to the rejection of the Winklevoss Bitcoin ETF, ProShares along with the other two companies filed 9 ETFs, thus basing the price of BTC related to the ETFs on the futures market that is operated by the CME Group and CBOE. At that time, the ETFs were considered a smart move since the companies took into the consideration the SEC’s concerns regarding cryptocurrency exchanges. 

Yet, the SEC rejected all 9 ETFs, stating that the futures market is not big enough to support an ETF. 

Depository Trust & Clearing Corporation Will Support BTC ETF

During the recent presentation, VanEck, SolidX, and CBOE representatives told the SEC that the futures market is able to handle the operation of an ETF through the Depository Trust & Clearing Corporation (DTCC). 

VanEck also highlighted that the approval of an ETF would reduce counterparty risk for investors. It would also provide a simple solution for investors that are seeking price exposure. It would do so by increasing the stability of the market. 

VanEck representatives reportedly stated during the presentation:

“As of now, no CCPs support the clearing of bitcoin Investors are left facing absolute counterparty risk. Such risks are often unacceptable to many investors An ETF provides a straightforward solution for investors seeking price exposure without facing counterparty risk, as the ETF would be cleared through DTCC Furthermore, in creations and redemptions, the Trust always requires APs and trading counterparties to settle their leg of the trade before the Trust will do so.”

The suggestion of VanEck backs the statement of SEC commissioner Hester Peirce, who has earlier noted that the current structure of the cryptocurrency exchange market only enables a selected group of investors with specific knowledge in the market to trade and benefit off the liquidity in the market. Hester Peirce has been quoted as saying:

“This complexity means that only a very particular type of investor can pursue the diversification opportunities such assets can provide. Entrepreneurs are developing new products through which people can access cryptocurrencies indirectly or hedge their cryptocurrency holdings. Bitcoin futures, for example, began to trade recently.”

Think we missed something? Let us know in the comments section below. 

CBOE Bitcoin ETF VanEck SEC
The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZMarketz.com, nor should they be attributed to AtoZMarkets.

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