With Gary Gensler’s nomination as president of the Securities and Exchange Commission and the approval of a true Canadian Bitcoin ETF, there was a renewed interest in Bitcoin exchange-traded funds (ETFs). It is still unclear whether someone will be approved in the US.
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When is ETF?
The big news last week was that the Ontario Securities Commission approved North America’s first Bitcoin ETF in Canada. An ETF that is essentially a retail-friendly, regulated bitcoin investment tool and able to trade on popular brokerage apps, for a long time a product the industry wants. Numerous applications have been denied in the US, but the approval of someone in Canada could be an early sign that we will see something similar in America soon.
Why is it important
Basically the idea is that a bitcoin ETF will provide day-to-day traders with:
- Bitcoin exposure through existing retail business applications such as TD Ameritrade, AMA:
- These traders will not have to actually buy bitcoin.
In short, an ETF allows people to invest in Bitcoin without having to set up a wallet or relying on an exchange that could drop when market volatility increases.
There are also those who believe that an ETF will help ignite or continue the bull run, but Elon Musk’s almost do it yourself right now I’m not sure if an ETF seems as necessary as it was in 2018.
The crypto market has matured since 2017 and 2018, when the U.S. Securities and Exchange Commission (SEC) rejected ETF applications left and right.
Bitwise Asset Management’s chief investment officer, Matthew Hougan (a firm that has gone to great lengths to get Bitcoin ETF approval) told CoinDesk that the crypto-linked futures market has grown significantly, core spot markets functioning better, and the US regulatory structure has improved. . But is that enough?
The real question is whether the market has matured enough to meet the requirements listed under the Securities Exchange Act, the federal law governing securities trading in the United States.
Ark Investment Management CEO Cathie Wood recently told an audience that the SEC thinks the Bitcoin market must be in demand for $ 2 trillion for it to be comfortable with an ETF.
Hougan isn’t so sure by saying that he thinks bitcoin’s futures market is comparable in size to hard wheat (hard wheat has more ETFs than you can tell for both a futures market and onions).
Some considerations about whether to apply for a bitcoin ETF include the new management and the nomination of Gary Gensler as SEC chairman. Perhaps best known for his work on derivatives regulations at the Commodity Futures Trading Commission after the recent financial crisis, Gensler is expected to be quite crypto-friendly, at least to the degree of approving an ETF. Still, there are questions.
“It is definitely too early to tell what his view on crypto will be, whether it will be a priority, what it will do to influence the market, and I think this could even be an early talk,” Hougan said.
At the very least, although Gensler is dealing with crypto, it is unlikely to be a priority given most of the other issues it needs to address, including possibly having to create a response to the market volatility seen with GameStop last month. stock pump.
The better question is what has changed in the last two years.
According to Hougan, factors that will support an ETF approval include:
- Market activity increased;
- Regulatory control has improved;
- New storage solutions entered the market; and
- There are better inspection processes.
However, the SEC used various appeals in rejecting past ETF applications. Top questions include:
- Whether the SEC’s market surveillance questions have been answered; and
- Whether the SEC’s questions of market manipulation have been answered.
“The market has gotten better and so the question you ask is ‘do we know enough’ and ‘has the market been good enough’ and we just don’t know,” Hougan said.
A positive sign for the industry is the approval of an open-ended ETF in Canada last week. To be clear, it’s not the first fund to trade in Canada: 3iq launched a bitcoin fund last year. However, this is the first ETF to trade on a retail exchange (Toronto Stock Exchange) in North America.
Eric Balchunas, a senior ETF analyst at Bloomberg, said on Twitter that Canadian regulators “usually followed this soon after” in approving such products, calling the approval a “good sign” for American applicants.
Here is what should be:
- A company must apply for an ETF by completing a Form 19b-4. Two companies have recently applied for an ETF: VanEck and Valkyrie. However, none of them completed a form 19b-4 that would initiate the SEC review process.
- However, when someone fills in form 19b-4, the SEC must confirm that they have reviewed it. This starts a 45-day review period.
- The SEC may say it needs more time and / or provide feedback. The agency may extend the review period up to 240 days (240 days from today, October 14).
- SEC staff will decide whether to approve the application and then accept five commissioners (or disagree as the case may be).
At some point, the SEC will have to approve or reject the application.
- If the application is approved, congratulations to the card issuer and the next big thing everyone will be excited about.
- If the application is rejected, a Commissioner (or applicant) can request a review of the decision. This happened on nine ETF applications that were denied simultaneously in 2018. I still have no idea what the verdict was.
- Think about it, the SEC also reviewed a Bitwise application that was denied. The company later withdrew this application.
In short, while there are positive signs for an ETF approval in 2021, nothing is guaranteed.
In other unrelated news, last week, SEC Deputy Chairman Allison Herren Lee issued a statement ending proposals for conditional settlement that could lead to faster resolution of SEC cases. This means that cases could continue for longer for crypto companies stuck in the SEC sight. (Here’s looking at you: Ripple.)
The statement stated that the agency’s Enforcement Office will no longer propose agreements that depend on whether a company has received a waiver to act as a Well-Known Experienced Issuer (WKSI).
These waivers had their advantages. In the past, it could have been used as part of a settlement proposal if the SEC was suing a company for securities law violations.
In other words, if the SEC Enforcement Office was suing a company, a firm dealing with a hypothetical cryptocurrency, for alleged violations of the law, it could have been a deal affiliated with the firm that received WKSI status. This has helped companies know what their penalties will be in a deal and what they can do after a lawsuit.
Lee said this led to a potential conflict between different divisions of the SEC.
This new policy will appear to reduce the likelihood of such settlements occurring in the future.
Commissioners Hester Peirce and Elad Roisman backed down against the movement in an opposing statement, writing that the previous policy did not cause any structural conflict.
Companies may be less willing to follow the deals if they do not know whether they will receive waivers to continue operating, they warned that this could result in more time (and therefore resources) being spent pursuing cases.
It is not yet clear what the upcoming chair Gary Gensler will do. By the way – I will talk about this case at a virtual panel hosted by the New York Financial Writers’ Association at 7:00 PM ET next Tuesday. Come check it out.
To be honest, not much has happened in the last week. No new nominations, approval sessions are not yet scheduled. However, the US Senate’s impeachment case against former President Donald Trump has ended, which should give the body more time to consider candidates.
Changing the guard
In another place:
Apart from crypto:
- Tesla Bitcoin Betting Explains the Limits of Crypto Accounting Rules: OK, so in crypto, but outside of CoinDesk. Anyway, it turns out that Tesla should report any potential loss in the value of the $ 1.5 billion cryptocurrency he bought last month, as taxes are odd, even if the holdings have fallen in value before, even if they haven’t actually sold Bitcoin. The next earnings report, according to Bloomberg. However, if bitcoin’s value increases, Tesla cannot report it. This is because those that set US tax standards (the Financial Accounting Standards Board) have not established any specific guidelines on digital currencies. Probably It wouldn’t hurt even if it did, but Bloomberg Tax reported that this will not happen anytime soon.
- Canadian Woman Cited in Online Attacks Arrested in Toronto: A few weeks ago I flagged a New York Times report on how a single person might have posted false information about a number of people over the decades. Now he has been arrested by Canadian police on abuse and defamation charges.
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