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Pseudo-Bitcoin ETF Now in SEC’s Sights After VanEck Pulls Application

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While Bakkt’s Bitcoin futures contracts have been all the rage recently, much has taken place in the realm of Bitcoin exchange-traded funds (ETF) — investment products expected to have a similar long-term effect to Bakkt.

The already-muddy Bitcoin ETF waters got even muddier on Tuesday after the U.S. Securities and Exchange Commission (SEC) announced in a filing that it had begun the assessment of yet another application. No concrete verdict was given.

Crypto ETF

Semi-Bitcoin ETF In SEC Proceedings

According to the Tuesday filing, the SEC is currently evaluating the rule change that would allow NYSE Arca to back Wilshire Phoenix’s Bitcoin trust. The SEC purportedly has just over a month to make a decision on the product.

It is important to note that Wilshire Phoenix’s proposed Bitcoin product is different than its more vanilla counterparts. Instead of offering 100% BTC exposure, Wilshire’s trust will hold positions in both the cryptocurrency and short-term U.S. Treasury bills and American dollars. In a document published to the SEC earlier this year, Wilshire wrote the following on this concept:

“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.”

The document went to say that the Trust isn’t meant to direct emulate a capital allocation in Bitcoin. Instead, Wilshire sees the instrument as a way for prospective investors to gain minimal, but sufficient exposure to the leading cryptocurrency.

VanEck Gracefully Bows Out of ETF Race

Wilshire may be making steps in the right directions, but last week, VanEck and SolidX, the partners behind a leading Bitcoin ETF application, revealed that they had pulled their application from the SEC prior to the October 18th deadline.

VanEck’s sudden decision to pull its application came shortly after SEC chairman Jay Clayton last week said that “there is still work left to be done” for this class of cryptocurrency products.

Clayton went on to double down on his common critiques of the cryptocurrency market, casting doubt on the nature of Bitcoin’s underlying market as BTC “trades on largely unregulated markets” and the fact that Bitcoin custodial offerings may not be ready for institutions to use.

And unfortunately, Tuesday’s volatility in the cryptocurrency market likely only sullied the SEC’s thoughts on a Bitcoin ETF.

Bitwise Still Optimistic

While VanEck has gracefully bowed out of the Bitcoin ETF race and the SEC’s Commissioners remain skeptical, one horse is still pressing forward, even doubling down on the idea that the cryptocurrency market needs a U.S.-regulated, institutionally-available BTC investment vehicle.

The San Francisco-based crypto investment firm last week unveiled a 31-part slide deck explaining why it believes this market is ready for and needs a Bitcoin ETF.

As reported by Forbes Crypto, Bitwise’s three main points of support were as follows:

  1. the Bitcoin spot market has become much more efficient, with the entry of new products, market makers, and institutional investors driving liquidity;
  2. the custody of cryptocurrency is an institutionally-backed trend, with Bakkt, Fidelity Digital Assets, BitGo, Coinbase Custody, Kingdom Trust, among other regulated firms joining the mix
  3. the CME Bitcoin futures market has become “significant”, actually making up a large portion of BTC-to-USD trading volumes.

This slide deck was published to address the SEC’s three primary concerns with a Bitcoin ETF: the fears of a lack of liquidity in the underlying market, the potential that current custody solutions are inept, and the idea that Bitcoin is still primarily driven by trades on overseas exchanges.

Bitwise’s proposal is expected to be voted on before October 14th.



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I am a writer who has been following the cryptocurrency space since 2013. My insights and interviews have been featured in leading publications in the industry such as LongHash, NewsBTC, and Decrypt. When I am not writing, I work as a team member of the EXODUS division of HTC, a Taiwanese electronics company. I own a small amount of Bitcoin. Contact NickC@blockonomi.com

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