Are Bitcoin ETFs On the Way? Cboe Submits First Application Following Moderate SEC Classification
Jul 9, 2018
Cboe Global Markets has filed a Bitcoin exchange-traded fund (ETF) application with the United States Securities and Exchange Commission (SEC). If approved, it would draw in institutional investors into the Bitcoin market. The Commission has so far been adamant to refuse any cryptocurrency ETF filings due to the unregulated nature of the industry. Even with the introduction of Bitcoin futures by the Cboe and CME last year, the SEC still didn’t offer any approval for Bitcoin ETFs.
Details of the Bitcoin ETF Filing
According to the details of the Bitcoin ETF filing made public by the SEC, Cboe plans to partner with VanEck Investment and SolidX. The latter two had submitted an earlier Bitcoin ETF proposal to the SEC.
The proposed Cboe BTC ETF will allow investors purchase shares in SolidX with each share being equivalent to 25 BTC. If all goes according to plan, Cboe plans to launch its Bitcoin ETF before the end of Q1 2019.
Bitcoin and Ethereum are Not Securities
This time, the Cboe will be hoping that things go differently given that the SEC seems to be declaring a more moderate tone towards BTC and ETH. In June, the SEC said that Bitcoin and Ethereum were not securities. This news was especially significant for Ethereum given that there had been intense debate over whether it was, in fact, a security.
This is the first cryptocurrency ETF filing since the SEC made those comments. Many experts have identified the emergence of ETFs as the next step in the evolution of cryptos into the mainstream financial market. Institutional investors tend to stay away from virtual currencies due to lack of regulations and the volatile nature of the market.
With ETFs, just like with futures, large investors don’t have to worry about price movements to make profits.
The Quest for Bitcoin ETF
In a related development, the largest speed trader in Europe, Flow Traders NV recently announced the commencement of Bitcoin and Ethereum ETN trading. The Dutch-based company plans to trade in the ETNs launched by XBT Providers on the Swedish stock exchange market. Flow Traders will hedge each trade using futures contracts provided by both the Cboe and CME. The company hasn’t released any information on whether it plans to use the actual cryptocurrencies for the hedging.
Exchange-traded notes (ETNs) are not dissimilar to ETFs. The primary difference lies in the fact that with ETF, the trader is investing in a fund that tracks the price movement of the asset. This asset could be a bond, stock, or any other commodity. However, investing in an ETN is like trading in the bond market.
I bumped into Bitcoin in 2010 while I was still engaged in the fierce battle of obtaining my Engineering degree. I found the content of Nakamoto’s white paper fascinating since it reminded me of the works of legends like Haber and Stornetta. When I am not writing about cryptocurrencies, I am either attempting to beat my scrabble high score or engaged in some internal existential debate.