CBOE Global Markets, the operators of major commodities exchanges in the United States, has urged the Securities and Exchange Commission (SEC) to open the floodgates for Bitcoin ownership and trading via investment vehicles known as ETFs, or Exchange Traded Funds.
ETFs are a popular way for retail investors, institutions, and pension funds in the United States to purchase stock of publicly owned companies in specific sectors. Rather than buying stock for a single company, an ETF allows investors to group entire classes of stocks, for example technology companies. A technology ETF might hold investment in several different technology companies, allowing an investor to purchase all of the companies in a “basket” without having to purchase each one individually.
Several institutions and hedge funds are actively trying to get approved for cryptocurrency and blockchain focused Exchange Traded Funds that would hold a basket of cryptocurrencies or blockchain related companies.
The SEC said in January that that “significant investor protection issues” need to be examined before they move forward with any approval for cryptocurrency ETF trading.
But a response from the CBOE says that the framework for regulation already exists and that the SEC should begin moving forward with trading approvals for Exchange Traded Funds. Suggesting that Bitcoin has matured beyond being just a novel digital assets traded on the fringes of the internet, CBOE says Bitcoin has liquidity and volumes similar to other commodities markets:
Cboe’s letter said the exchange believes “that the vast majority of these concerns can be addressed within the existing framework for commodity-related funds related to valuation, liquidity, custody, arbitrage, and manipulation.” The March 23 letter was signed by Cboe President Chris Concannon.
Cboe believes ETFs would give investors a more transparent and accessible way to get exposure to cryptocurrencies than the spot market
Cboe and rival CME Group Inc have successfully launched cash-settled bitcoin futures contracts, however, which the exchange operators self-certified in December and are regulated by the Commodity Futures Trading Commission.
Cboe asked the SEC to evaluate each cryptocurrency fund and underlying cryptocurrency-related holdings on a case-by-case basis.
“As the volumes continue to grow, especially on regulated U.S. markets, the overall spot bitcoin market looks more and more like a traditional commodity market and Cboe continues to believe that the spot market is sufficiently liquid to support a bitcoin ETP.”
The SEC has previously rejected numerous blockchain and cryptocurrency related ETFs in recent months, including the CBOE backed Bitcoin ETF spearheaded by well known Bitcoin entrepreneurs The Winkevoss twins.
While fraud and price manipulation of Bitcoin remain a serious concern for regulators, the legal framework for securities and commodities is clearly defined and enforceable.
With the CBOE weighing in and various regulators around the world warming up to the idea of cryptocurrencies as investment vehicles, 2018 could be a break-out year for a technology that has seen interest grow to tens of millions of investors.