The SEC will soon have to make the decision regarding the application for bitcoin ETF by Winklevoss Capital Management. If approved, the bitcoin ETF will be traded on Bats BZX Exchange. The application was filed on June 30, 2016. The decision date was rescheduled by the SEC. According to the official statement, the final ‘yes or no’ decision must be made before March 11, 2017, within 240 days from the date of initial filing.
According to the proposal, the bitcoin ETF will be traded as commodity-based Trust shares on the Bats BZX exchange. The shares will represent units of fractional undivided beneficial interest in and ownership of the Trust. Gemini Trust Company, LLC will hold the deposited bitcoins on behalf of the Trust in a segregated custody account. Gemini will use it’s offline (“air-gapped”) cold-storage system to store Trust’s bitcoins.
The trust will hold bitcoins as an asset, with only purpose to track the price of bitcoins. The price will be determined as a spot price at 4:00 pm Eastern Time on the Gemini Exchange each day the exchange is open for trading minus trust’s liabilities (accrued but unpayed fees and expenses). On each day, the trust administrator will use the Gemini exchange spot price as measured at 4:00 pm Eastern Time to calculate trust’s asset value. As an additional security measure, it is recommended that independent monthly ‘audits’ of bitcoins held by the trust should be performed.
Approval of a bitcoin ETF will be a gigantic step in official acceptance of bitcoin as an investment tool, giving portfolio owners the opportunity to get exposure to bitcoin without being involved in technicalities of bitcoin trading exchanges. The inflow of additional money into the bitcoin market through ETF may also give boost to bitcoin prices. Unfortunately, experts, familiar with the SEC decision making process are skeptical about the success of the application:
“In contrast to most of the people that we speak to in the industry, we think the probability that a bitcoin ETF will be approved in 2017 is very low,” analyst Spencer Bogart said in a research note. “To be clear, we don’t see any specific reason to disapprove the Winklevoss Bitcoin ETF, but, instead, think that the confluence of fear, uncertainty and doubt coupled with basic incentives at the SEC will make it very difficult to get approval.” …
“We think the positive effect that a bitcoin ETF would have on the price of bitcoin is vastly underappreciated, and that the probability of approval is drastically overestimated within the industry,” Bogart wrote. (Read the full article)