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On 16 November, the leading Swiss stock exchange, the SIX Swiss Exchange, announced that it will list the world's first multi-exchange multiple exchange (ETP) product.
Exchange-traded products (FTEs) are derivative prices traded on a national stock exchange. Their pricing derives its value from other investment instruments, most commonly found in the form of commodities, stocks and indices.
The first global multi-encrypted ETP has the support of the Swiss startup Amun AG and will be listed under the HOLD tick symbol. According to the announcement, ETP will monitor five of the largest cryptocurrencies in the industry: Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC).
The announcement also reveals that each of the five cryptocurrencies will achieve a certain degree of market share within the ETP, although Bitcoin will account for about half of the total assets of the ETP. XRP, now the second largest cryptocurrency, will constitute 25.4% of assets, followed by Ethereum with 16.7, 5.2% Bitcoin Cash and Litecoin with 3%.
Despite many hopeful product launches in the crypto sector that attempt to accelerate generalized adoption, regulatory issues remain a serious and consistent barrier to progress. Hany Rashwan, co-founder and CEO of Amun AG, has not overlooked this potential critical point and claims that the product will comply with the stringent existing policies that apply to all other FTEs.
The official Amun website states that SIX Swiss Exchange is Europe's fourth largest stock exchange and has a market capitalization of $ 1.6 trillion.
The quotation of the multi-cryptographic exchange is not the first European experiment with cryptographic ETPs. The Swedish company XBT Provider manages CoinShares's profitable publicly traded product since 2015. This list is the latest development of cryptography in Sweden, a state well known for its open approach to innovation in the fintech sector, as well as a planned country become the first "cashless economy".
Coinshares has two Bitcoin trackers: XBT Bitcoin Tracker One (COINXBT) and XBT Bitcoin Tracker Euro (COINXBE). As previously reported by Cointelegraph, the two trackers operate in both euros and Swedish kroner. The product assigns 200 shares equivalent to the price of a bitcoin for trading in Swedish krona and 20 shares to a bitcoin for the euro version. The product is accessible to investors across Europe and has attracted over $ 1 billion from its 2015 listing on the Stockholm Nasdaq, leading developers to launch additional versions in neighboring Denmark, Latvia, Finland and Estonia.
Coinshares drew the attention of billionaire scriptwriter Mark Cuban to the start. Speaking at the Vanity Fair New Establishment Summit in Los Angeles, Cuban commented on the investment experience and the attribution of asset value:
"It's interesting because there are many goods whose value is based only on demand and supply. [With] most of the shares, there is no intrinsic value, because you do not have ownership rights and voting rights. You only have the opportunity to buy and sell those securities. Bitcoin is the same thing. Its value is based on the supply-demand. I bought some through an ETN based on a Swedish exchange ".
According to Bloomberg, COINXBE has a total assets of 96.5 million euros and COINXBT has a total assets of 986.3 million Swedish crowns.
The battle of the ETF continues in the United States
Perhaps the most consolidated method of exchange in the cryptic world is that of exchange-traded funds (ETFs).
An ETF tracks a commodity, bonds, a stock index or one or more assets. Single-asset ETFs are now on the agenda and can be used to negotiate a variety of assets, such as gold. Because ETFs are already an important tool for passive investments in traditional finance, many actors in the crypto community hope that ETFs will pave the way for widespread uptake.
Part of the appeal of ETFs that trace a basket of assets is that, by their very nature, they are less prone to the risk of fluctuations to which other investment instruments are vulnerable. As the value of the investment is spread across multiple assets, the losses from underperforming assets are offset by those that accumulate more quickly value. As a result, ETFs enjoy popularity among low-risk investors.
A Bitcoin ETF keeps track of Bitcoin as an underlying asset. This translates into the investor who holds the security of Bitcoin without actually owning the coins themselves. So far, Bitcoin's ETF applications to the US Securities and Exchange Commission (SEC) have been unsuccessful. The billionaire twins and the main crypto-players Tyler and Cameron Winklevoss have so far had two high-profile questions denied by the SEC, the most recent of which was rejected in July. The refusal was accompanied by a 92-page application report that did not agree with the Winklevoss Bitcoin Trust statement that the Bitcoin markets are "inherently resistant to manipulation". In the report, the SEC has elaborated on this point in particular:
"The arguments presented in support of this statement are incomplete and inconsistent and are not supported or contradicted by the data."
Despite repeated stoppages for the unfortunate applications of the Winklevoss twins, the seemingly uncompromising approach of the SEC did not prevent further requests in the course of the year.
SEC rethinks the latest application of the ETF
At the start of this year, the investment management company VanEck and the technology company blockchain SolidX, have applied for a physically backed Bitcoin ETF to be listed on the BZX Equities Exchange of the Chicago Board Options Exchange. The proposal would see each ETF share valued at around $ 200,000 in an attempt to attract institutional investors.
This tactic could prove profitable for the two companies, considering the October report by Morgan Stanley who documented Bitcoin's new potential for traditional institutional investments. Furthermore, the fact that the ETF is supported by derivatives means that the companies in question will actually have BTCs in relation to their corresponding value, a factor that could be important for influencing the way the regulatory decision will fall for the 39; application.
As the SEC decided to postpone its decision in August, the two companies have not yet received an official response. Given that, since 22 August, a total of nine applications for Bitcoin ETFs of three distinct applicants have been rejected outright, the nature of the ESA's decision-making process has been exhausted, along with the huge potential for transition to the financial mainstream that leads , the result is eagerly awaited by the crypto community. However, the SEC published a memorandum from a meeting on the proposal in October.
The memorandum outlines past relationships between the two companies and the regulator, taking into account their most recent and ongoing project and the failure to offer SolidX for an ETF to be listed on the New York Stock Exchange (NYSE) in March 2017. The memorandum is the SEC's reasoning behind the nine previously rejected requests. Two of the applications were made by ProShares, five more were sent by Direxion and two by GraniteShares. The SEC tended to the idea that the Bitcoin futures market had a "significant" demand and expressed concern about the possibility of "fraudulent and manipulative acts and practices":
"[…] the exchange did not offer any record evidence to show that the Bitcoin futures markets are "markets of significant size". This failure is fundamental because […] the exchange failed to establish that other means of preventing fraudulent and manipulative acts and practices will be sufficient, and therefore the sharing of surveillance with a regulated market of significant dimensions linked to Bitcoin is necessary. "
The memorandum also documents how VanEck, SolidX and representatives of the Chicago Board Options Exchange (CBOE), in disagreement with the regulators on this issue, add that the choice of the word "significant" was deliberately inaccurate and allowed them to manipulate the agreements between the parties involved:
"As broadcasters, we are worried that SEC staff have created a mobile target in their use of the word" meaningful. "The staff never gave any indication of what" significant "means, allowing them to move the door indefinitely.
Despite the SEC's stalwart stance on previous questions, Commissioner Hester M. Peirce has announced that the regulator will look at them again in the future. In a publication that broke from the SEC's official position on Bitcoin and cryptocurrency in general, Commissioner Peirce said the regulator had overstepped its "limited role" in focusing on the market itself over the derivative in question:
"The Commission erroneously reads […] the [Securities Exchange] Law, which requires […] that the rules of a national stock exchange are "designed to prevent fraudulent and manipulative acts and practices …" [It] focuses its decision not on the ETP shares to be quoted […] but on the underlying Bitcoin spot market […] [instead of] the capacity of BZX […] monitor trading and discourage the manipulation of ETP shares listed and traded on BZX. "
On October 4, the SEC announced that "by November 5, 2018, any party or other person may file a statement in support or in opposition to the action presented under the delegated authority".
The latest proposal by SolidX, VanEck and CBOE has been reported to the regulator until February 2019.
SolidX, VanEck and CBOE are not the only ones to predict a more open approach to Bitcoin ETFs. CNBC cryptanal analyst Brian Kelly he believes the Chicago Mercantile Exchange statistics indicate a growing trend towards the derivatives market and a rapidly evolving futures market. Kelly said that this will probably improve the environment for ETF SEC Bitcoin approvals as early as next year:
"Here are the CME Futures open to the interest of the great owners. [As of] April, you're starting to see a big increase […] about a growth rate of 85 percent. If you extrapolate it, by February 2019, you will have a very robust market here. "
However, not all cryptographic players share the same bullish approach. The technology entrepreneur, Andreas Antonopoulous, said that although he expects the SEC to approve Bitcoin ETFs, he does not expect long-term benefits from the cryptography industry:
"I'm going to blow up your bubble, I know many people really want to see an ETF happen because it's the moon and lambos, but I think it's a very bad idea, I still think it will happen, I think it's a very bad idea, I'm actually against ETFs, I think a Bitcoin ETF will damage the ecosystem. "
Skepticism spreads outside the United States
On November 20, the UK Financial Regulatory Authority, the Financial Conduct Authority (FCA) announced in a speech that is considering a ban on cryptocurrency derivatives. The regulator stated that this latest announcement was part of his intention to create his "most complete" response to the industry.
Speaking at the "Cryptocurrency Regulation" event in London, FCA's executive strategy and competition executive, Christopher Woolard, emphasized that the organization was examining the possibility of outlawing derivatives. The ban would probably also include options, futures and transferable securities. Woolard elaborated on how the FCA is concerned about consumer welfare, as well as other issues on the market:
"We are concerned that retail consumers sell complex, volatile and often leveraged derivative products based on exchange tokens with underlying market integrity issues."
Light at the end of the tunnel for the ETPs
From the mixture of cryptic players' comments, what seems to be gaining ground is the notion that the encrypted products exchanged on the stock exchange will probably enter the sector, regardless of whether they will enrich the sphere of cryptocurrency or not. Despite the progress made in implementing these investment instruments in both Sweden and Switzerland, the real litmus test will be the regulatory decision of the SEC.
Commissioner Peirce's severe internal criticism of the past behavior of the regulatory body – along with the announcement that the last nine rejections will be reviewed – could indicate that fortunes are finally destined to change for encrypted products traded on the stock exchange in the United States.
While the U.K. working through his latest regulatory dilemma, other players argue that there is a propensity to market for Bitcoin ETFs and it is only a matter of time before they are made available.
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