Cboe Urges SEC To Support Bitcoin ETFs

  • Chris Concannon from Cboe Global Markets sent a letter the SEC explaining that bitcoin ETFs do not involve significant risk and their approval should not be hindered
  • The letter was in response to a letter from the SEC to Cboe in January which stated the SECs concerns that a BTC ETF would not provide sufficient investor protection

The exchange operator of Cboe Global Markets has said that the U.S. securities regulators should not hinder the development of a bitcoin ETF (exchange-traded-fund) as they are similar to any other commodity-based ETFs.

In January the U.S. SEC said that before a bitcoin ETF could be approved “significant investor protection issues” must be addressed. Other questions about the pricing, storing and settlement of the instrument were raised.

On March 23rd, Cboe President Chris Concannon wrote a letter to Dalia Blass, a Director at the SEC stating Cboe’s belief that existing ETF frameworks can relatively easily be applied to crypto-assets. The letter read:

“Cboe would like to take this opportunity to address certain of these concerns in an effort to further the discussion with a particular focus on exchange-listed Cryptocurrency Funds (“Cryptocurrency ETPs”

Cboe - Chris Concannon

The letter started with a brief ‘History of Cryptocurrency’ where Cboe explained the origins of bitcoin and the growth of crypto-assets. Following this the letter discussed certain questions the SEC may have over crypto-assets and their suitability for ETFs.

“While Cboe shares many of the concerns raised in the Staff Letter, we believe 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”

Cboe - Chris Concannon

These question areas were broken down to the following issues:

  • Valuation
  • Liquidity
  • Custody
  • Arbitrage
  • Manipulation and Other Risks

An often-cited concern is that crypto-asset markets are not liquid enough to support financial products such as ETFs safely, however, Chris Concannon stated:

“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”

Cboe - Chris Concannon

After detailing responses to the above concerns, Cboe believes that ETFs would provide a safer access to cryptocurrency exposure than traders investing in the underlying asset.

The letter from Cboe was in response to the SECs letter released in January that outlined their concerns over approving an ETF as it could cause market fragmentation and that investors would not be sufficiently protected.

Global Task Force, U.S. Tax Agency, SEC Dominate Crypto Headlines

Regulations are ruling the crypto headlines so far this week. Over the past 24 hours, we’ve learnt the Financial Action Task Force (FATF) is reportedly set to finalize new international standards for regulating cryptocurrency firms next month. The commissioner of the Internal Revenue Service (IRS) has stated his agency has “made it a priority” to issue more comprehensive crypto tax guidance “soon.” Finally, the U.S. Securities Exchange Commission (SEC) announced it would delay, once again, its decision on the VanEck and SolidX Bitcoin exchange-traded fund (ETF) proposal.

At the time of writing, bitcoin (BTC) and ether (ETH) are trading at $7,945.4 and $252.9; a 0.54% and 0.83% jump over the past 24 hours, respectively. As for the MVIS CryptoCompare Digital Assets 10 Index, it is currently tracking at 3,822.7 (-0.6%).

Global Standards for Regulating Crypto Firms Next Month

According to reports from CoinDesk, the FATF is set to finalize new international standards for regulating cryptocurrency firms next month. These standards, they report, are widely expected to subject crypto exchanges, wallet providers, and other businesses to the “travel rule” – a colloquial term given to a rule found in the Bank Secrecy Act (BSA) that requires all financial institutions to pass on certain information to the next financial institution, in certain funds transmittals involving more than one financial institution.

Introduced in 1996 in the U.S., the “travel rule” is designed to help law enforcement agencies detect, investigate, and prosecute money laundering and other financial crimes by preserving an information trail about persons sending and receiving funds through funds transfer systems. The arrival of such international standards would go beyond the basic know-your-customer requirements that are widely enforced in the crypto space at present.

IRS Commissioner: More Detailed Crypto Tax Guidance ‘A Priority’

According to letter from IRS Commissioner Charles P. Rettig dated May 16, the agency has “made it a priority” to issue a more comprehensive tax guidance for cryptocurrencies. The Commissioner’s letter was written in response to a request from 21 Congressmen to provide clarity on tax treatment in relation to cryptocurrency holdings.

In 2014, the U.S. tax agency issued a guidance for cryptocurrency. In his May 16 response letter, Rettig revealed the IRS will “soon” issue more robust guidance. “I share your belief that taxpayers deserve clarity on basic issues related to the taxation of virtual currency transactions,” the Commissioner wrote.

SEC Delays Decision on VanEck SolidX Bitcoin ETF

The SEC announced the postponement of a decision regarding the VanEck SolidX bitcoin ETF proposal. The postponed ETF proposal was initially filed over a year ago. In January – amid the U.S. Government shutdown – it was withdrawn, only to be resubmitted later that month. On March 29, the commission delayed the joint proposal for the first time. The SEC must announce its decision – or, for the final possible time, postpone its decision – on the proposed bitcoin ETF no later than August 19.

Notably, the U.S. investor watchdog is seeking comments from the public in relation to the proposed VanEck SolidX bitcoin ETF. To guide commentary, they included fourteen questions in Monday’s filing. Comments must be submitted within the following 21 days, whilst rebuttals to said comments are due within the next 35 days.