CBOE VanEck SolidX Bitcoin ETF Seeks Different Outcome Than Winklevoss’ Appeal Denial
SEC Might Approve A Bitcoin ETF
The SEC has always had a heavy role in deciding the future of Bitcoin within the United States. From the onset of their position on the cryptocurrency, the opinions of the agency seem to have flip-flopped on a near-weekly basis. This isn’t particularly surprising, considering the quickly-changing nature of the cryptocurrency markets, or the deeply-entrenched sense of bureaucracy which precludes much of the progress in American institutions.
But the most recent question which has once again asked for the adjudication of the Securities and Exchange Commission is whether any company will be allowed to begin offering a Bitcoin ETF. An ETF is functionally a security that allows people to bet on the increase or decrease in value of a certain security or commodity. For Bitcoin, it would allow investors on Wall Street to take their fiat money and either long or short the digital currency, depending on how they feel the market might go.
But the SEC has been slow to embrace any kind of Bitcoin ETF. This past week, a group of five Bitcoin ETF proposals were given a postponement in decision by the U.S. regulator, with little reasoning given as to why. Shortly following that mellow decision, the agency came down hard on another proposal, rejecting it entirely. The Winklevoss Twins had proposed a Bitcoin ETF again earlier this year, the second time they have done so in the past two years. This means that only one application still in the works has not been decided upon—and it might just be a winner.
The SEC flat rejected this application, mainly on the grounds that the proposition did not meet the qualifications necessary to effectively prevent manipulation or fraud within the Bitcoin market. Additionally, the commission applied similar surveillance standards to the Bitcoin ETF proposition, ruling that they would be rejected because they failed to enter an acceptable surveillance agreement with an acceptably-sized Bitcoin exchange.
Furthermore, the SEC ruled that the markets for Bitcoin constitute “regulated markets” of “significant size,” yet another standard typically applied to other ETFs when they seek regulatory approval by the SEC. This rejection is significant, because it again codifies the previously-considered rule—Bitcoin ETFs will be held to the standard of any other ETF seeking approval from the SEC.
Despite the grim outlook for the Winklevoss ETF proposal, the CBOE proposal for a Bitcoin ETF still might have a shot. It is clear from its rejection pattern that, due in no small part to the lack of significance in the size of most Bitcoin markets, investor security plays a massive role in the decisions the SEC makes in regards to its ETF approvals.
CBOE has a history of successful interactions with the SEC, having been regularly recognized as compliant on multiple fronts. They are run by a massive and respected money management company with provided insurance of up to USD $125 million for the digital assets. The insurance of investors, as well as the targeting of higher- net worth individuals, are both important parts of the SEC’s deliberation that CBOE seems to have on its side.
On the other hand, the SEC seems deeply interested in the logistical security measures, such as surveillance and agreements with major exchanges that operate as the backdrop and foundational elements of investor security in an unsecure market. In these respects, it will require that the SEC look deeply into the nature of the proposal in front of them.
The implications would be significant for the crypto-markets, especially if the SEC rules in favor of CBOE and approves their Bitcoin ETF proposal.