Earlier this year, the SEC had turned down a request by the Winklevoss twins to allow a bitcoin ETF. Back then, the value of one bitcoin was just over $1,000, yet last week it surpassed the $20,000 mark. Furthermore, since then, bitcoin has gained more acceptance across the world, and now some major exchanges are requesting the SEC to allow bitcoin ETFs once again. Will this time be the charm?
Why did the SEC reject previous bitcoin ETFs?
The SEC had never acknowledged bitcoins or any other altcoins as actual assets until their 25th July ruling. The agency had stated that some of the coins being offered were actually securities, and that they needed to be regulated. This was an expected reaction to an idea that had led to the raising of more than $3 billion so far. Although at the time many felt that the ruling would have no impact, there have recently been fears that the SEC may crack down on ICOs as China and South Korea has done.
However, the situation is different now since even the CFTC agreed to consider bitcoin as a commodity. The decision by the CFTC led to the adoption of bitcoin futures in the CME and CBOT exchanges this month. Next year, even more exchanges are also considering adding these bitcoin futures, including Nasdaq. Meanwhile, we are seeing other countries considering the regulation of bitcoin and even acceptance for it as legal tender as Japan did, although this may be a long way down the road.
The point is that, this is not the same environment the SEC was dealing in back in March. Besides, there are some key differences between the bitcoin ETFs being applied for today than those the Winklevoss twins had applied for earlier in the year.
About the latest bitcoin ETFs filing
Yesterday, Coindesk reported that the ICE, the parent company of the NYSE, had applief for bitcoin ETFs with the SEC. The actual application had been made on the 4th of December, right around the time when CBOE was planning to launch bitcoin futures. In the proposal, the NYSE would list two bitcoin ETFs – the ProShares Bitcoin ETF and the ProShares Short ETF. Both of the bitcoin ETFs would track the value of bitcoin from either the CBOE or CME for quotes.
Over the past few months, there have been several applications for bitcoin ETFs by other companies, but the SEC is yet to make a ruling. However, the move by ICE to file their own application means that they are optimistic, and that perhaps some of the previous proposals may have reached the approval stage.
There are also some differences that could make it possible to see bitcoin ETFs in 2018. One of the reasons the SEC turned down the Winklevoss proposal was that ETFs were supposed to track bitcoin prices from the Gemini exchange, which does not have a large proportion of trading volume. Furthermore, there were fears of market manipulation due to large trading volume originating from China at the time. Unlike that idea, NYSE’s proposal would track an already regulated exchange and in an industry where the US has a large market share. All these factors make the idea seem optimistic but still possible.