The prospect of a Bitcoin ETF has been widely discussed for the last few years, and despite all previous applications for a US-based fund being rejected or withdrawn, the latest rhetoric from the SEC appears to suggest the commission is ready to consult with industry stakeholders, who may be able to address their concerns such that a viable Bitcoin ETF can finally come to fruition in 2018.
The final quarter of 2017 saw the introduction of regulated Bitcoin futures products, via both the CME Group and Cboe Global Markets in the US, representing an increasing normalisation of Bitcoin as an asset within the framework of traditional finance, and an important new vector for fund providers to use in crafting a Bitcoin ETF. The Bitcoin futures contracts have now been trading for a number of months, and their early successes may have encouraged the latest dialogue from the SEC and the release of a document last month in which they have extended the consultation period of formal proceedings for a rule change to allow the NYSE to list Proshares Bitcoin ETFs. This appears to be in direct contrast to a staff letter penned by Director of the Division of Investment Management Dalia Blass at the SEC in January, which seemed to downplay the chances of an ETF being approved in 2018, citing “a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors”.[1][2]
The formal consultation process which was initially started at the end of 2017, is essentially a request for industry stakeholders to provide comments to address the handful of points of contention over Bitcoin ETFs, specifically regarding fair valuation, sufficient liquidity, effective pricing arbitrage and asset custody. These are reasonable considerations that
