U.S. SEC rejects Valkyrie, Kryptoin Bitcoin trusts
reuters.com
reuters.com
Custodianship is probably why they’ve rejected direct spot ETFs that own real bitcoins. It would be disastrous if hacked. There’d be no restitution for investors.
With futures-based bitcoin products, no one is actually holding bitcoins. It’s cash settled between the long and shorts based on a published closing price. So the BITO ETF has no risk of being irreparably hacked.
Some of the different ETFs are filed under different legislations, and the SEC claim that the Investment Company Act of 1940 provided better investor protections than the Securities Act of 1933, but I’m unclear of what particular stipulations make that so.
It appears cash settled futures were put in place in 2017 specifically to break the bull market in btc at that time. It worked.
The price was totally unsustainable given the amount of supply entering the market daily due to mining. An insane amount of money would have had to flow into bitcoin every day to sustain those prices. At least, insane given the size of the bitcoin market at the time. There is no need for any other explanation for why the bull market ended in early 2018.
If the spot market is manipulated, the futures will reflect the manipulated price. Though the SEC doesn't come out and say it, it looks like this is a concern around custodianship.
Bitcoin futures are hedged at the periphery. If a trader loses their Bitcoin, they are unhedged and go broke through usual channels. Bitcoin ETFs hold that risk at the centre. If they lose their Bitcoins, we have to deal with trading halts and moms-and-pops losing their shirts and the family office that quintuple-leveraged their ETF bet and is threatening to take out a bank.
Gives the applicant space to cure the concerns and the SEC room to reverse in the future.
It did seem to me that a good portion of congressman/woman were in favor of new rules for the industry and its interactions with the traditional financial system. Most were concerned about keeping the dominance of the USD long term on the global financial system.
I’ve found being the best product on the market to be the best way of ensuring one’s dominance.
The dollar isn't better managed than all the other currencies. It's a network effect of debt denominated in USD, one of the most relevant of which is that taxes for about 25% of global GDP is paid in dollars.
If the government had a problem with that, something drastic would've changed.
You can speculate that the US will deteriorate into a state where there will be currency controls and stuff, but in our lifetimes, it hasn't been like that.
People say, or used to say, a lot, that oil being denominated in dollars meant something. I mean, that the choice of units has great economic value, somehow. But nobody's denying that you can exchange one currency for another at any time, right?
I clearly don’t know what that better thing will be (I have some vague ideas…), but still I can’t convince myself that Bitcoin will ever be humanity’s best-engineered clearinghouse.
If you really want to play the game, prewrite the law you want and jam it into a debt ceiling bill that congress has to pass.
When your friends want to buy in low, you let big money short the hell out it.
SEC: derivatives of a trillion dollar asset are risky
This is all a theater. The real reason is they are trying to slow down the proliferation of cryptocurrencies.
The US stock markets are largely permissionless from the regulatory perspective. The SEC is not in place to make a judgement on the merit of an asset. But when you operate a fund, with a fund manager, that takes custody of retail assets, now they are in a gatekeeping position. Its a combination of Acts that never envisioned “ETFs” at all, let alone “digital asset commodity exchange traded products”
So the laws have to be updated to get them back out the way. The SEC itself had a comment period on this but it was largely missed.
By default, every securities transaction in the U.S. requires SEC approval [1]. There is a long list of exemptions, a list which the SEC maintains, that permit e.g. the private markets.
In this sense, the U.S. took an ersatz European regulatory approach. It is obsessively permissioned. It was a drastic response to a drastic crisis--Black Thursday and the Great Depression.
[1] https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-188...
But less vague, “approval” doesnt mean judgement was pased and gatekept, approval means that disclosures are made and investors can make their own decisions with that level of disclosure. And then there are exceptions to that where the SEC gatekeeps and likes that power
Poorly regulated derivatives were what caused the last financial crisis.
UK is taking a bit of action: https://edition.cnn.com/2021/12/22/football/arsenal-socios-a...
https://www.fca.org.uk/publications/policy-statements/ps20-1... / https://www.fca.org.uk/publication/policy/ps20-10.pdf
"We are prohibiting the marketing, distribution and sale in or from the UK to all retail clients, of derivatives and ETNs that reference certain types of unregulated, transferable cryptoassets"
The US bans haggis, and the EU bans Mountain Dew, and few people bat an eye.
Total nontransparent markets such as the pink sheets? Fingerprinting VWAP trades by institutions and then front running them?
SEC likes to protect the status quo
You say that like there was somebody malign doing that.
>Total nontransparent markets such as the pink sheets?
Or that.
Absence of people to trade with is not something that someone is doing to you.
If you choose not to go the grocery store, but instead see if anyone is selling anything on a random street corner, whose fault is that?
Hey, sometimes there's someone with steaks they have to get rid of fast because the A/C on their truck broke.
It's actually sillier than this. They think that derivatives of bitcoin are fine (futures ETF approved) while simultaneously saying bitcoin itself is too dangerous (spot ETF denied).
People say, oh oh oh, GBTC and other substitutes don't track bitcoin. Well, yeah, maybe that's nature's way of telling you that keeping actual bitcoin safe is expensive. Pay your money and take your chances.