Since Bitcoin began to plummet in early-2018, crypto investors who entered positions near or at the market’s peak have been grasping for straws. Their bids to right a seemingly sinking ship have often taken the form of advocating for products that would promote price discovery and adoption, such as a Bitcoin exchange-traded fund (ETF), physically-settled futures, and vehicles of similar caliber.
But, on Wednesday, these desperate industry participants were dealt a blow from American regulators, as the U.S. Securities and Exchange Commission (SEC) mandated one group to pull its crypto-linked fund application.
Reality Shares’ Bitcoin ETF Application Pulled
As reported by Blockonomi, Reality Shares, a Californian crypto-centric asset management group, filed a peculiar application to the SEC, America’s leading financial regulator. This proposal outlined an ETF that was composed of both allocations in CME’s and CBOE’s Bitcoin futures and monetary instruments, like sovereign debt products denominated in the British Pound, Japanese Yen, Swiss Francs, among other government-issued currencies.
In response to inquiries regarding the fund’s unique status, Reality Shares’ chief executive, Eric Ervin, said:
“The SEC doesn’t want to approve a full blown crypto ETF but this limits exposure to 15%.”
While many pundits quipped that the fund’s non-crypto-centric structure could entice the SEC and its commissioners to issue their stamp of approval, this was far from the case. In the fastest Bitcoin ETF-related turnaround time in this industry’s relatively short history, the governmental agency politely requested for Reality Shares to pull its innocuous application. In a comment issued to CoinDesk, a company lawyer and spokesperson noted:
“I can confirm that we did withdraw it and it was withdrawn because the staff are still taking the position that it’s not appropriate to file a registered 40 Act fund with cryptocurrency exposure at this time.”
Reality Shares’ counsel also explained that SEC’s staffers took issue with the fact the fund was filed under the Investment Company Act of 1940, which would have allowed the Bitcoin vehicle to see an automatic approval after 75 days.
Hopefuls Remain Optimistic.
Although the SEC’s recent order likely has common Joes and Jills worried, Bitcoin ETF hopefuls themselves have kept their heads high.
Bitwise Asset Management chief executive Hunter Horsley sat down with CNBC’s Bob Pisani to express optimism regarding the prospects of a crypto-backed fund. Horsley explained that cryptocurrencies as a whole are in their “most viable” state ever, adding that an ETF tracking these assets is somewhat of an inevitability. On the matter of the SEC’s concerns regarding potential market manipulation and custody, the Bitwise CEO was confident that strides were being made to amend the issues.
Ric Edelman, a world-renowned investor based in Philadelphia, echoed Horsley’s comments to a tee. The Wall Street legend told CNBC’s “ETF Edge” that the trading of a cryptocurrency product on U.S. markets is a matter of “when,” not “if.” Like Horsley, the Philadelphia-based investors explained that the regulatory incumbents with jurisdiction over digital assets are slowly coming to terms with the state of this embryonic space.
Even an SEC commissioner has expressed that from his insider perspective, the eventual launch of a Bitcoin ETF isn’t off the table. In an exclusive interview with Congressional Quarterly, Robert J. Jackson of the American entity remarked that he hopes and believes that a crypto upstart will “satisfy the standards” that the SEC has outlined.
Jackson’s coworker, Hester “Crypto Mom” Pierce, has also made comments that should instill some semblance of confidence in the hearts of the investors the world over. Since overtly voting in favor of the Winklevoss Twins’ Bitcoin ETF application, Pierce has become a crusader for fair regulation in this space. Yet, Pierce doused some hope on Tuesday, as she explained at the Bipartisan Policy Center that the SEC’s “arcane rules,” which weren’t created to influence digital assets, could stifle the timing of a Bitcoin ETF seeing a green light.
Then again, she did once remark that when the cards fall into place, the institutionalization of this space will occur.