While there have been numerous failed attempts at a Bitcoin ETF to date, the latest application from CBOE Global Markets may have its best chance yet.
Buying Shares in Bitcoin
The SEC published the application to invite comments from the public . The Cboe plans to offer clients to buy shares in SolidX, which are currently worth approximately 25 bitcoin. Meanwhile, the fund itself will acquire bitcoin in over-the-counter fashion.
“[The ETF], under normal market conditions, will use available offering proceeds to purchase bitcoin primarily in the OTC markets, without being leveraged or exceeding relevant position limits,” the document reads.
It would also provide insurance coverage to clients “underwritten by various insurance carriers” against any potential loss or theft of the bitcoins (i.e. private keys) held by the ETF.
The document explains:
The insurance policy will carry initial limits of $25 million in primary coverage and $100 million in excess coverage, with the ability to increase coverage depending on the value of the bitcoin held by the Trust.
It’s not the first time the Cboe, one of the world’s largest holding companies, has attempted to get approval for a Bitcoin ETF. The last rejection occured in March despite Cboe Global Markets president, Chris Concannon, writing a direct letter to the SEC, to alleviate some of the concerns about investing in cryptocurrencies such as low liquidity.
“While cryptocurrency-related holdings do raise a number of unique issues, Cboe firmly believes that such holdings do not require significant revision to the well-established frameworks for evaluation related to valuation, liquidity, custody, arbitrage, and manipulation,” Concannon wrote.
Last month, Bitwise Asset Management’s global head of exchange-traded products, John Hyland, noted that some clarity from the SEC would be required to boost the chances of seeing a Bitcoin ETF “sooner rather than later.”
“I think we get them sooner rather than later,” he stated. “But I also think that if we don’t see any action by the SEC in the next two months, we’ll jump to 2019 and beyond.”
The clarity happened. A few days later, the Director of Corporate Finance, William Hinman, announced that Bitcoin, Ether, and other decentralized cryptocurrencies will not be classified as securities.
Therefore, the new position could open the door for the regulator to greenlight the given ETF. What’s more, just last week the SEC approved plans for public comment, which would make it easier for investment companies to bring new ETFs to market.
Cboe has tenaciously pursued getting approval for a Bitcoin ETF while already being one of the first to launch Bitcoin futures last December. It clearly sees huge potential in custodial services and as a bridge between traditional finance and the borgeoning cryptocurrency industry. In fact, even JPMorgan acknowledged in February that a Bitcoin-based ETF would be a “holy grail for owners and investors.”
With Europe also making strides towards launching its own cryptocurrency ETFs, the question now appears to be a matter of not if, but when.
If the Cboe finally gets its wish, the Bitcoin ETF will be open to client investment in the first quarter of 2019.
Does the Cboe have better chances this time around at a Bitcoin ETF? Share your thoughts below!
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