Business 11 January 2019

Erik Gibbs

Bitwise takes a stab at a crypto ETF in the US

Despite the fact that the Winklevoss brothers and VanEck have had difficulty convincing the U.S. Securities and Exchange Commission (SEC) to green-light their cryptocurrency exchange-traded funds (ETF), a new startup isn’t deterred. Bitwise Asset Management is looking to introduce its own ETF, positive that its version appropriately addresses the commission’s concerns and will find regulatory approval.

In a registration form filed with the SEC, the Bitwise Bitcoin ETF Trust would track its “Bitwise Bitcoin Total Return Index,” which would be used to measure the value of Bitcoin Core (BTC), as well as any “meaningful hard forks.” The ETF would possibly be listed on the NYSE (New York Stock Exchange) Arca, an exchange that targets stocks and options other than large-cap stocks that are traded on the NYSE.

The index would be underpinned to the valuation of the fund, providing spot prices derived from physically-settled futures contracts, as opposed to cash-settled contracts, and exchanges. The SEC has previously denied most crypto ETFs – although it is still considering the VanEck/SolidX application – because they were based on cash-settled contracts.

John Hyland, the global head of ETF for Bitwise, said that the company is “optimistic that 2019 should be the year that a [BTC] ETF launches.” He added, “We believe the crypto trading ecosystem has evolved in significant ways in the past year … Having a regulated bank or trust company hold physical assets of a fund has been the standard under U.S. fund regulation for the last 80 years, and we believe that is now possible with bitcoin.”

Bitwise asserts that the company’s proposal stands out from past crypto ETF proposals because it would incorporate third-party custodians to store the BTC held in a trust. It also says that the index upon which the ETF is based will calculate prices using data that is taken from a “large number of cryptocurrency exchanges.” This will allow Bitwise to represent “the majority of currently verifiable bitcoin trading.”

The head of research for Bitwise, Matt Hougan, further asserts that the firm’s proposal was drafted based on feedback given by the SEC to previous ETF proposals. He explains, “We have spent the past year researching these questions and look forward to discussing those findings with the SEC staff in connection with the filing and listing application.”

NYSE Arca is expected to file for the required rule-change proposal in the next few days.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Satoshi Vision (BSV) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BSV is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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