SEC Requests Public Feedback on CBOE’s Latest Proposal for Bitcoin ETF
The U.S. Securities and Exchange Commission (SEC) is soliciting public feedback on yet another application for a bitcoin-based exchange-traded fund (ETF), reigniting the debate over whether the regulator will soften its stance on crypto-backed funds.
SEC Seeks Feedback
Regulators issued the call in response to a proposal by the Chicago Board Options Exchange (CBOE) to list and trade bitcoin shares backed by VanEck and SolidX, according to documents published on the SEC website.
As Hacked reported earlier this month, VanEck and SolidX are looking to develop a new bitcoin-linked ETP that will provide direct exposure to the digital currency. The fund proposes to hold actual units of bitcoin rather than merely track the cryptocurrency’s price movement through the derivatives market.
According to SEC documents, the trust will invest solely in bitcoin through over-the-counter markets as well as domestic and international exchanges, “depending on liquidity” and other factors. The trust “is not actively managed,” the documents say.
If approved, the SolidX Bitcoin Shares will operate in a similar fashion as the Bitcoin Investment Trust, which is offered by Grayscale Investments and can be accessed over-the-counter through the GBTC symbol. As an OTC product, GBTC faces liquidity shortfalls that otherwise wouldn’t be the case had it been listed on an SEC-regulated exchange.
Bitcoin ETF: The Quest Continues
Securities regulators continue to entertain the possibility of a bitcoin-backed ETF but have rejected a slew of applications over consumer safety concerns. In the case of VanEck, the issuer has made three separate attempts to list a bitcoin-based ETF in an effort to lure more retail investors into the fold.
The SEC is seeking public commentary on a rule change that would open the door to bitcoin ETFs. The rule in question is Section 19(b)(2)(B) of the 1934 Securities and Exchange Act.
Issuers like VanEck believe that a properly constructed ETF that provides direct exposure to the price of bitcoin will help protect shareholders against volatility associated with sourcing and holding cryptocurrencies. Interestingly, the SEC does not view bitcoin itself as a security, but its securitization does fall under the purview of the Washington-based regulator.
Issuers have attempted to circumnavigate the SEC’s concerns by proposing ETFs that trade bitcoin futures rather than the underlying asset itself. Technically, these products would fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
Since January, roughly one dozen bitcoin-based funds have been rejected by the SEC over concerns of market manipulation, liquidity and the impact of hard forks on market prices.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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