SEC and CFTC May Approve Bitcoin and Ethereum ETFs This Fall
Citing two unnamed sources within the SEC and CFTC, ZeroHedge reported on July 24, 2018, that bitcoin and ether ETFs are likely to be approved this fall. This is one of the final steps before these Exchange Traded Funds are listed on the NYSE exchange.
Speculative Leaks about U.S. Regulation of Crypto Exchange Traded Funds
Sources from both the SEC and the CFTC have confirmed that approval for crypto ETF and the associated regulation may be on the horizon.
According to the Federal Register, the SEC will announce their decision on September 21, 2018. If approved, one firm, in particular, Direxion, would list the following funds on the NYSE:
- Direxion Daily Bitcoin Bear 1X Shares
Direxion Daily Bitcoin 1.25X Bull Shares
Direxion Daily Bitcoin 1.5X Bull Shares
Direxion Daily Bitcoin 2X Bull Shares
Direxion Daily Bitcoin 2X Bear Shares.
The anonymous source from the CFTC reported the following:
“I would call it 90% at this point. The crypto markets have moderated, and regulators have watched the lack of drama surrounding Bitcoin futures across several global exchanges.”
Exchanges like Coinbase and Gemini have both provided increasing levels of customer service and protections on crypto accounts. According to a recent filing with the Federal Election Commission, Coinbase has even created a Political Action Committee (PAC). Continuing, the CFTC source states:
“The price moderation and adoption of a ‘peer product’ is what the conversations have centered around. In January [2018] we were justifiably concerned about a bubble and the harm a quickly approved product could attract speculators and create losses that led to significant lawsuits. Now, those factors seem to be mitigated significantly.”
With the recent decrease in the bitcoin price from ~$18,000 in January to $8,000 today, selection bias does not seem to be an issue. The second anonymous source who is a former SEC employee said:
“I would expect a positive outcome in September – or if it gets strung out a little further it is simply a few ‘dotted i’s and crossed t’s’ are being finalized on larger regulatory language in the crypto space.”
A recent report from Autonomous Research indicates that there is $40 trillion sitting on the sidelines from institutional investors waiting for this approval. This SEC source continued:
“To be clear, most of the regulation will be first focused on ICO’s and the issues those pose for retail investors at the moment. US residents are sending money to all sorts of exotic locations to invest in unregulated instruments with absolutely zero recourse for losing every cent they’ve put at risk. ICO regulation will begin to solve those issues and keep client assets ‘onshore.’”
Along with the approval of the Exchange Traded Funds, the SEC will be announcing U.S.-based regulations of ICO products. The contents of the crypto regulation remain to be seen and how it will affect all the existing ICO products as well as new ICO products being developed both in the US and offshore.
Who Stands to Gain from This?
The first Bitcoin ETF to be submitted for approval was by the Winklevoss twins, Cameron and Tyler. The pair gained notoriety from taking the proceeds of their $11 million Facebook investment and putting it into bitcoin. Given the concerns that the SEC had with their March 2017 rejection, this sent the price tumbling for investors.
One of the ETFs that stands to gain from this windfall is the CBOE ETF. They have filed a total of three times with the SEC. The most recent rejection by the SEC was due to the following concerns:
“Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated. Therefore, the Commission does not find the proposed rule change to be consistent with the Exchange Act.”
From reading the comments on the SEC website, they have received an overwhelming amount of positive support for Crypto ETF products. It stands to reason that the SEC should follow public opinion and to respect the hard work put in by financial professionals and to approve these ETF products. These moves would go a long way towards protecting U.S. investment dollars that are currently going into unregulated offshore markets.
Considering that the SEC is now releasing cryptocurrency ICO regulation along with its’ approval, this could provide a solid launch for the “Cambrian Explosion” of crypto.
