SEC Postpones Decision on VanEck Bitcoin ETF, Again
The price of Bitcoin has plunged more than 9% in the last 24 hours following the announcement from the SEC that once again delays its decision on the rule change for a VanEck’s Bitcoin exchange-traded fund. The new deadline is February 27, 2019.
The Bitcoin ETF that was proposed by money manager VanEck and SoldiX in partnership with CBOE BZX exchange has been delayed for the third time by the SEC in Thursday’s circular. SEC stated:
“The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change.
Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,10 designates February 27, 2019, as the date by which the Commission shall either approve or disapprove the proposed rule change.”
Altcoins are following the Bitcoin’s crash path and are crumbling one by one, as XRP has declined by 10.71%, Ethereum [ETH] by 16.01%, Stellar Lumens by 16.32% and in an interesting turn of events, Bitcoin SV has overtaken Tether [USDT] and Bitcoin Cash [BCH] to take the rank five for itself.
Just hours earlier, Gabor Gurbacs — VanEck’s director of digital asset strategy — expressed confidence that SEC approval of the investment firm’s Bitcoin ETF application was around the corner. He gave three reasons as to why he believes Bitcoin (BTC) is “not uniquely susceptible to market manipulation”.
Gurbacs noted that there was increasing compliance with KYC/AML procedures, with prominent industry players implementing these protocols. The crypto industry is also moving towards a self-regulatory framework, with ten leading firms recently establishing the Association for Digital Asset Markets (ADAM) to create a Code of Conduct for markets. Finally, the CFTC of the USA has increased oversight, claiming that BTC is a commodity. However, after the announcement was made he called it “expected”:
Note on #Bitcoin #ETF delay:
-The delay ‘til 02/27/2019 (final decision date) was expected.
– I see lots of good market structure improvements in the markets on pricing, custody & surveillance.
-America still wants a Bitcoin ETF.
– SEC publication: https://t.co/gth5IKJQ4N pic.twitter.com/q1moX8MJmB
— Gabor Gurbacs (@gaborgurbacs) December 6, 2018
SEC Shifting Goal Posts
Despite the growth in the Bitcoin derivatives market, the SEC has been moving targets for the approval of Bitcoin ETFs. Earlier the securities agency stated that commodity-trust exchange-traded products (ETPs) have been always approved, historically, in the context of “well-established, significant, regulated markets for futures.”
One of their latest memorandum counters this SEC argument saying that multiple Bitcoin derivative products like futures exist in the crypto market, regulated by the CFTC. Moreover, these products are launched by big players like CME and CBOE. In August 2018, SEC rejected a total of nine Bitcoin ETF proposals citing concerns of lack of regulations in a crypto derivatives market, of a “significant” size.
Last month, SolidX CEO Dan Gallancy reaffirmed his stand saying the latest delay in the decision has not caused any change in the outlook of the proposal. Eric Balchunas, a senior ETF analyst for Bloomberg Intelligence, told that the order looked “like more of the same in terms of seeking comment and asking questions regarding some of their major concerns.”
There are high-hopes pinned on the arrival of CBOE Bitcoin ETF. Not only crypto enthusiasts but big players from the global financial market are eagerly looking towards it. In August, the SEC, in one shot, rejected a total of nine Bitcoin ETFs from Direxion, GraniteShares and ProShares, saying that they were not competitive enough to handle market manipulation. The decision was later taken into reconsideration by SEC Commissioner Hester Peirce.
Approval Within the Next Few Months
There is the uncertainty within the SEC on how to regulate bitcoin ETFs. At least two of the five SEC commissioners are viewed as being supportive of a bitcoin ETF, although SEC Chairman and Commissioner Jay Clayton does not seem supportive.
In August, the American securities regulator simultaneously rejected nine separate bitcoin ETF proposals from ProShares, GraniteShares, and Direxion. Then, 24 hours later, the SEC stayed its own decision and announced it was re-reviewing the applications.
Jake Chervinsky, who is an American lawyer (an associate at the law firm of Kobre & Kim) commented:
As expected, the SEC has delayed its decision on the VanEck/SolidX bitcoin ETF proposal until the absolute final deadline of February 27. The order doesn’t say anything of substance, but you can see it here: (https://t.co/2yfAIbm2cu)
This is it. The SEC *cannot* delay again.
— Jake Chervinsky (@jchervinsky) December 6, 2018
And in case you are wondering what would happen if the SEC decides on/before 27 February 2019 to disapprove this proposal, Chervinsky again has the answer:
They could file an appeal to have the Commissioners review the staff’s decision. That’s what happened with the Winklevoss ETF, which was denied by staff in March 2017, and then the Commissioners affirmed the staff’s decision in July 2018. Otherwise, yes, they start all over.
— Jake Chervinsky (@jchervinsky) December 6, 2018
BlackRock Will Wait Until Crypto Becomes ‘Legitimate’
Market insiders are divided on whether a bitcoin ETF is a good idea. Among the skeptics is Larry Fink, the CEO of BlackRock — the world’s largest asset manager and ETF provider.
As we already wrote, BlackRock has slowly started to embrace cryptocurrencies, but said it will not launch a bitcoin exchange-traded fund until crypto becomes “legitimate.”
“I wouldn’t say never — when it’s legitimate, yes. It will ultimately have to be backed by a government. I don’t sense that any government will allow that unless they have a sense of where that money’s going.”
Recently, SEC commissioner Hester Peirce, who is known for her pro-crypto stance, receiving the title of “Crypto Mom,” claimed that a Bitcoin ETF could come “tomorrow or in 20 years.” She said:
“Don’t hold your breath. Look, it took a long time for [the] SEC even to establish Finhub.”
The U.S. Securities and Exchange Commission has always been pretty reluctant to approving ETF products. The agency explains it denial citing several cases of market manipulations and the exchanges’ inability to deal with it. Speaking at the Consensus: Invest conference earlier this week, SEC chairman Jay Clayton said that crypto exchanges have the lack of proper market surveillance tools. Clayton also referred to stock exchange like Nasdaq and NYSE having proper surveillance tools preventing manipulative activities:
“When you see an asset trade on [the] Nasdaq or NYSE, there’s a great deal of surveillance preventing you and me from teaming up and pretending we’re decentralized. Those sort of safeguards do not exist in a lot of markets where digital currencies trade.”
Nasdaq Likely to Launch Bitcoin Futures Contracts by Q1 2019
Last month Nasdaq said they were planning to launch its Bitcoin Futures contracts by Q1 2019. Citing two people familiar with the matter, Bloomberg reports that Nasdaq is working closely with CFTC to get the regulatory approval for its futures contracts. The report reads:
“Nasdaq has been working to satisfy the concerns of the U.S.’s main swaps regulator, the Commodity Futures Trading Commission, before launching the contracts, the people said. The New York exchange operator, which was first reported to be eyeing Bitcoin futures last year, wants to allow trading in the first quarter of 2019.”
Today’s announcement gives little relief to the crypto community that has speculated for months on how an ETF approval might boost the slumping market by further legitimizing the space and allowing institutional investors to gain exposure to Bitcoin without actually holding the underlying asset.
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