Bitcoin ETF Disrupted by SEC Liquidity

The U.S. Securities & Exchanges Commission have prohibited a series of Bitcoin exchange-traded funds and two cryptocurrency mutual funds on January 8, 2018.

The regulator’s anxieties comprise the safety of bounding traded ETFs to potentially illiquid assets & whether funds can be exactly esteemed when the prices of virtual coins are soared, said people with information of the matter.

It enables speculation that there would be a range of crypto ETF & mutual funds, when Bitcoin futures initiated trading on CME Group Inc. and Cboe Global Markets Inc. exchanges. Accordingly, it leads the mass of new investors & raises Bitcoin higher. Later it surged more than 1,400 percentin the previous year.

Javier Paz, a senior expert at consultancy Aite Group stated that

This is not business as usual, it’s brand new terrain. The SEC’s approach is prudent and a sign of the times. Somebody needs to be the grown-up in the room, to feel comfortable about handing out the keys to the ETF world.”

An SEC spokeswoman has not answered to an appeal for comment.

Some of the fund companies were said by the SEC to drop their application after the commitment of regulator’s staff. The agency desires more time to review and verify the proposed funds actually comply with U.S. securities law. It has been considered that some investment would have been based on futures, while others would directly start trade with Bitcoin. Hence, it seems to sell on lightly regulated exchanges.

The withdrawals of this week include four ProShares proposed ETFs and one from VanEck, as per SEC filings. Cboe sponsors mutual fund has also pulled its registration.

SEC rejected the Winklevoss’s proposal

In the month of March 2017, the SEC concluded to reject a Bitcoin exchange-traded fund projected by investors Cameron & Tyler Winklevoss, founder of Gemini, a Bitcoin exchange. Meanwhile, the regulator raised matters that exchanges would not have potential to execute adequate surveillance of the underlying market.

Another concern was uncertainties that hedging would be close to impossible because of the deficiency of Bitcoin derivatives.

Most of the traders had supposed that the presence of CME & Cboe futures contracts would resolve the problem of hedging. But SEC staff has directed that Bitcoin futures themselves don’t assurance to allow ETFs based on the cryptocurrency. In recent meetings with financial industry representatives.

The SEC has never formed the inclusive policies for approving ETFs, same as mutual funds but trade like stocks. Firms willing to enter into the business must register and wait for the clear approval from the agency.

David Shillman, an associate director in the SEC division, stated in the industry conference when the SEC rejected the Winklevoss’s proposal, an official said they required to observe a vigorous, regulated derivatives market.

Most of the brokers averse to participate because of concerns about unregulated spot markets for Bitcoin. And those who already involved have fixed very high margin necessities.

Till now, the trading of Cboe and CME’s futures contracts have ranged amid $106 million and $181 million worth of Bitcoin, According to Bloomberg.

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Elena R

Elena is an expert in technical analysis and risk management in cryptocurrency market. She has 10+year experience in writing - accordingly she is avid journalists with a passion towards researching new insights coming into crypto erena.

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