Despite swelling institutional interest, better crypto market conditions, and improved infrastructure, the U.S. Securities and Exchange Commission (SEC) has been slow to accept a Bitcoin-backed fund with open arms.
Bitcoin (BTC) may be a non-security in the eyes of the financial regulator, but products centered around the cryptocurrency still purportedly come with inherent risk. And thus, the SEC has yet to accept a single application for a crypto exchange-traded fund (ETF). Yet, one firm has an unorthodox proposal to calm the SEC’s qualms.
NYSE & Wilshire File New Bitcoin(ish) ETF
Earlier this year, Wilshire Phoenix, a New York-headquartered investment management group, alongside NYSE Arca submitted an S-1 filing with the SEC.
The filing purportedly pertained to a crypto-backed product, named the United States Bitcoin and Treasury Investment Trust. Unlike suggested vehicles from VanEck & Co. or Bitwise & Co., Wilshire’s trust was meant to hold positions in not only BTC but short-term U.S. Treasury bills and American dollars too. Explaining that rationale behind this diversification, unheard of in the crypto industry, the ETF hopefuls wrote in the legal document:
“The purpose of the Trust is to provide investors with exposure to BTC in a manner that is more efficient, convenient and less volatile than purchasing stand-alone BTC.”
At the time, however, Wilshire’s document was just a prospectus. Now, a new filing has revealed that the regulatory approval process for the product has officially begun, meaning that it has 45 days to make an initial decision to accept, deny, or delay.
While some fear that this application was denied, just like its predecessors, some have hope that this Bitcoin-laced vehicle can make it through the regulatory gauntlet.
The aforementioned prospectus accentuated that the trust isn’t meant to emulate direct exposure to Bitcoin. Instead, Wilshire claims that this proposed instrument is a way for investors to gain a minimal, yet a sufficient allocation to the leading cryptocurrency. Speaking to MarketWatch in January, a company spokesperson remarked that the somewhat unorthodox combination of U.S. bills, fiat, and Bitcoin would reduce “overall volatility in the price of the proposed ETF.”
To try and satisfy the SEC’s concerns about custody and asset security, Wilshire has purportedly confirmed that Coinbase Custody, an arm of the cryptocurrency giant that now has over $1 billion of assets under management, will be holding the Bitcoin invested. Moreover, the Wilshire fund has obtained $200 million worth of coverage against cryptocurrency theft from insurers.
This news comes just a day after the SEC revealed that it will be exercising its right to delay its decision on a Bitcoin ETF proposal from VanEck and SolidX. The agency cited concerns such as there being not enough infrastructure to prevent “fraudulent and manipulative acts and practices”.
And just days earlier, the firm issued a similar verdict on an application from Bitwise for similar reasons, confirming that establishing proper security techniques, surveillance methods, and more is of utmost importance.
Do We Even Need An ETF?
Such a vehicle might not be needed for the success of cryptocurrency though. Speaking to Yahoo Finance, one of the latest business news outlets to have dramatically ramped up its coverage of this embryonic space, CoinList’s Andy Bromberg explains that he isn’t too sure if a Bitcoin ETF “matters as much anymore”.
As Blockonomi explained in its previous report in this ongoing story and Bromberg noted, there are other infrastructural plays that will be boons for Bitcoin. Bromberg looks to the rumors that retail brokerage giants E*Trade and TD Ameritrade are soon going to offer direct Bitcoin trading to their clients.
Prominent researcher Alex Krüger does note though that while the two aforementioned brokerages offering Bitcoin would be good for retail, institutional players will still be looking for a good way to access the cryptocurrency market. And right now, an ETF is purportedly their best bet.
The SEC approving a bitcoin ETF would be a very big deal and go long ways into legitimizing crypto in the eyes of institutional investors with deep pockets.
— Alex Krüger (@krugermacro) May 21, 2019