The US Securities and Exchange Commission (SEC) reportedly informed two bitcoin exchange-traded fund (ETF) aspirants their cryptocurrency products lack enough liquidity and are problematic in discovering valuation.
Also read: Bitcoin Turns 9 Years Old
Two Firms Withdraw Bitcoin ETF Proposals from SEC
Wall Street’s main regulatory body, the US Securities and Exchange Commission (SEC), sent chills down bitcoin ETF hopefuls, as the regulator reportedly expressed concerns about the potential of bitcoin futures bundled together as a tradable stock, according to reports.
The regulator is gatekeeper to listings on the New York Stock Exchange (NYSE), and has received somewhere near a dozen applications for bitcoin ETFs. Worries about “valuation” and “liquidity” were cited in withdrawal filings, according to reports. Withdrawals came Monday, 8 January 2018, just days after a headline-making ETF product was formally proposed.
Direxion Asset Management’s asked no fewer than five ETFs be traded on the NYSE Arca, and those funds substantially increase risk exposure. In late December of last year, Chicago Board Options Exchange (Cboe) formally petitioned the regulator too in hopes of having half a dozen ETFs traded on the Bats BZX exchange.
Indeed with the advent of Cboe futures contract markets being made (along with crosstown rival CME), there was widespread optimism over the SEC policy. The agency wished to ensure viability of a financial product was first in place before going ahead on bitcoin ETFs. That standard seemed to be met by the two Chicago exchanges. By mid December, the agency hired a former ETF advisor to head a critical division in these matters. And by Fall of last year, even Bank of America was predicting giant potential for bitcoin ETFs. All seemed a go.
SEC vs CFTC
And then, “Trusts controlled by Rafferty Asset Management LLC and Exchange Traded Concepts LLC each canceled plans to launch three bitcoin funds that could be traded by retail investors as easily as stocks,” Reuters announced.
If the bitcoin ETF prospects are murky, one thing is crystal clear: US government financial regulators are confusing the very industry they’re designed to facilitate. As noted, bitcoin futures are already being traded in two very established exchanges, and things appear to be going well apart from the relative lack of excitement set against early expectations. Those markets are overseen by the Commodity Futures Trading Commission (CFTC).
The CFTC has been unusually welcoming despite a lot of pressure to reject crypto entrants into the mainstream. They’re even agreeing to testify before Congress at the end of this month to give lawmakers a status report.
By contrast, the SEC has dragged the process along for crypto funds. This is at least the third firm to withdraw from their process. Even its former Chair has suggested the agency wants no part of this brave new currency world, describing the SEC as woefully unprepared.
As of this writing, neither of the two latest firms to withdraw have publicly commented on the matter, nor has the SEC.
Do you think the SEC is being too picky? Tell us in the comment section below!
Images via Pixabay, SEC, Exchange Traded Concepts.
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Author: C. Edward Kelso