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For months, the SEC has discussed whether to approve or deny one of the industry's most promising bitcoin ETFs. With a final deadline set for February 27, an encrypted lawyer made a bold prediction of how the SEC will proceed.
The ETF VanEck / SolidX Bitcoin Trust was presented for the first time the SEC approval at the start of this summer. The fund traded on the stock exchange would be in the possession of real and physical bitcoins and is aimed at institutional investors. Some believe it has the best chance of being the first bitcoin ETF in the world.
While the SEC has denied any other bitcoin ETFs that met its desk, some believe this ETF is different. Firstly, the SEC did not deny having denied this ETF as if it had denied other ETFs. Instead, the SEC delayed the decision on the ETF VanEck / SolidX Bitcoin Trust twice to date.
With this in mind, the government's defense of execution and the Jake Chervinsky title litigation expert (@jchervinsky) he took on Twitter to explain where he feels the ETF is going next. Over a thread of 20 tweets, Chervinsky explains the thinking process of the SEC and the likelihood of this ETF being the first bitcoin ETF approved by the regulator.
"I think the ETF is in trouble"
First of all, Chervinsky begins his discussion with some bad news for the Crypto community:
"I'll say this in advance: I think the ETF is in trouble."
Chervinsky adds that he thinks that VanEck and SolidX "did a great job this year", but believes that the reasons for denying the ETF are out of their control. VanEck and SolidX have done everything in their power to create an effective investment product, but the same problems that led the SEC to deny the previous ETF proposals could lead them to deny this last one:
"When we last discussed the ETF on September 20, the SEC had just declared its" disapproval grounds for consideration. "The objective of this step is that the SEC explain all the reasons so it could deny the ETF so the sponsors and the public can answer all of them. "
The SEC's most important concern concerned market manipulation. The SEC wanted to make sure that Cboe BZX, the exchange in which the ETF would be listed, had a "sharing agreement with a regulated market of significant size". In other words, the Cboe BZX exchange has a connection to an actual discovery market price.
"I call it the most important question because it's the main problem that killed ETF Winklevoss on appeal in July 2018 (after the initial refusal in March 2017) and denying Winklevoss appeal is the SEC's most important decision because it came directly from the commissioners ".
The exchanges do not want to provide information on surveillance to the SEC
The problem is not finding an exchange to provide surveillance to Cboe BZX. The problem is to find an exchange willing to share surveillance information with the SEC:
"The problem for ETF sponsors is that most crypto-texters do not really want the SEC to look through their books, some are blocking US IP addresses to stay outside the SEC's jurisdiction. difficult to imagine those same exchanges that accept to oversee their clients for the SEC. "
Some of the largest cryptocurrency exchanges in the world actively block US IP addresses due to concerns of regulatory reactions by the SEC. These exchanges provide some of the most effective price comparisons in the bitcoin market. Unfortunately, it is unlikely to share data with the SEC.
"If the deadline were today, I would give the ETF a 10% approval chance"
Ultimately, Chervinsky tweets with 20 tweets are reduced to a crucial point:
"If the deadline were today, I would give the ETF a 10% approval probability.My prediction is largely based on the problem of manipulation.I think the possibilities of ETF approval will increase over time as that the market structure will continue to develop and further surveillance sharing agreements will be stipulated.The question is: how high can it go before the February 27th deadline? "
Chervinsky tweets summarize one of the biggest problems that prevent ETF approval: the lack of effective pricing mechanisms. Although these mechanisms will be built over time – for example, by companies like Bakkt – it seems increasingly unlikely that they will be available before the February 27 deadline. For all these reasons, Chervinsky believes it is unlikely that the SEC will approve the ETF VanEck / SolidX Bitcoin Trust.
Ultimately, the deadline for the ETF VanEck / SolidX Bitcoin Trust was set for February 27, 2019. The SEC may delay the decision on the ETF no longer: it must take a decision by that date. Chervinsky does not seem optimistic, although he feels that there is a possibility in 10 that the ETF is approved.
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