According to a letter written by Chicago Board Options Exchange (Cboe) President Chris Concannon, U.S. securities regulators should not stand in the way of exchange-traded funds (ETFs) that hold cryptocurrencies from coming to the market, as they are essentially the same as other ETFs that hold commodities.
The letter was in response to statements from the U.S. Securities and Exchange Commission (SEC) earlier this year, in which the agency said “significant investor protection issues” need to be examined before Bitcoin-based ETFs could be offered. The SEC also had concerns around how the products would be priced, stored, and safeguarded, according to Reuters.
Dalia Blass, the director of the SEC’s investment management division wrote: “Until the questions identified above can be addressed satisfactorily, we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products.”
Cboe believes ETFs would give investors a more transparent and accessible way to get exposure to cryptocurrencies than the spot market. As per Concannon’s letter: “the vast majority of these [the SEC’s] concerns can be addressed within the existing framework for commodity-related funds related to valuation, liquidity, custody, arbitrage, and manipulation.”
The purpose of Cboe’s letter isn’t to rush the SEC into making a decision, according to Concannon, but rather to “point out areas that can be satisfied” and advocate for the “development of the marketplace.” The exchange asked the SEC to evaluate each cryptocurrency fund and underlying cryptocurrency-related holdings on a case-by-case basis.
“This has been a priority for us since we approached the SEC almost a year ago with the Winklevoss brothers and their original Bitcoin filing,” Concannon said.
CBOE: Bitcoin Futures
Cboe has helped usher Bitcoin to mainstream banking, launching the first market for Bitcoin futures in the U.S. in December of last year. That followed an earlier attempt by Bats — an exchange acquired by Cboe in 2017 — to trade a Bitcoin-ETF from the Winklevoss twins.
A Bitcoin ETF was viewed as a natural next step in Bitcoin’s maturation as an asset after this launch of futures. In response to regulatory issues, however, a number of issuers have withdrawn their applications for a Bitcoin fund. As of now, about a dozen Bitcoin-linked ETFs are sitting in regulatory limbo, waiting for approval.
More than $70 billion in Bitcoin traded hands in the spot market in December when the price reached about $20,000, according to Cboe. Such liquidity would easily support bitcoin ETFs or other exchange-traded products (ETPs), the exchange asserted.
“As the volumes continue to grow, especially on regulated U.S. markets, the overall spot Bitcoin market looks more and more like a traditional commodity market and Cboe continues to believe that the spot market is sufficiently liquid to support a Bitcoin ETP [exchange traded product].”