The futures exchange, Cboe, filed for a Bitcoin ETF license with the SEC to enable customers to trade in the digital currency. The document filed to the SEC indicates the Cboe will invest in Bitcoin on behalf of investors and clients. The document further states that Cboe will facilitate OTC trades among different investors from the traditional finance market, while at the same time insuring Bitcoin funds obtained by investors.
One section of the document stated that, “The Exchange proposes to list and trade the Shares under BZX Rule 14.11(e)(4), which governs the listing and trading of Commodity-Based Trust Shares on the Exchange. SolidX Management LLC is the sponsor of the Trust (Sponsor). The Trust will be responsible for custody of the Trust’s bitcoin. Delaware Trust Company is the trustee (Trustee). The Bank of New York Mellon will be the administrator (Administrator), transfer agent (Transfer Agent) and the custodian, with respect to cash, (Cash Custodian) of the Trust. Foreside Fund Services, LLC will be the marketing agent (Marketing Agent) in connection with the creation and redemption of ‘Baskets’ of Shares.”
Cboe Not Alone
As of now, there are only three financial companies that have applied for ETFs. The three include Gemini, SolidX, and Cboe. However, this does not mean that applying for ETFs is uncharted territory. In 2017, several companies applied for ETFs, but received rejections by the SEC. The main reason for the rejections was that overseas countries did not have proper regulations. Additionally, price manipulation was apparent.
According to Jerry Brito the executive director of CoinCenter, “The Winklevoss ETF proposal was rejected because the SEC found that the significant markets for Bitcoin tend to be unregulated overseas markets that are potentially subject to price manipulation. But this creates a chicken and egg problem. How do we develop well-capitalized and regulated markets in the U.S. and Europe if financial innovators aren’t allowed to bring products to market that grow domestic demand for digital currencies like Bitcoin?” However, coming into 2018, all the major markets, like those in Japan and South Korea, created regulations to make it more stable and reliable.
Cboe seems to be meeting all the requirements of the SEC. In 2017, one of the rejections reasons for those applying for ETFs was an insurance problem. However, Cboe stated in its application letter that insurance will be available to all investors. Cboe indicated that the insurance covers investors against theft or even loss of Bitcoin held by the Trust. The insurance will also take care of Bitcoin in transit, destruction, fraud among other activities which can lead to losses.
If this latest ETF application receives approval, the crypto market will grow. This will come from new capital from investors from the traditional markets. This will push the value of the cryptocurrency markets high and see more adoption of digital assets.