U.S. SEC Officials Met With Bitcoin ETF Teams to Discuss ETF Feasibility

Representatives from VanEck, SolidX, and the CBOE’s BZX Exchange had a meeting with the U.S. Securities and Exchange Commission (SEC). According to reports, the objective of the meeting was to show SEC officials that the bitcoin market has reached a level of maturity comparable to similar commodities, such as crude oil, silver, and gold, which all have tradable ETF’s.

The SEC had members of their Division of Corporation Finance, Division of Trading and Markets, Division of Economic and Risk Analysis and Office of General Counsel present in the meeting, to hear the case for the Bitcoin ETF. The ETF issuers made the argument that: “similar to commodity futures, the spot and futures prices [of bitcoin] are tightly linked,” which confirms that we have “evidence of a well-functioning capital market.”

Another strong reason presented for bitcoin ETF approval was that it’s unlikely for there to be insider trading around any changes to the BTC supply. Unlike crude oil or precious metals, which can be suddenly discovered or impacted by global events, the supply of bitcoin is fixed and will never change. In addition, the fact that Bitcoin is traded across so many mediums (futures, options, and spot) without a price differential could show that manipulation is not happening:

The linkage between the bitcoin markets and the presence of arbitrageurs in those markets means that the manipulation of the price of bitcoin on any single venue would require manipulation of the global bitcoin price in order to be effective … Bitcoin therefore is no more susceptible to manipulation than other commodities, especially as compared to other approved ETP reference assets.

A few days ago, SEC Chairman Jay Clayton spoke at the Consensus: Invest Conference in New York City. During this interview, he spoke about the legality of initial coin offerings (ICOs), but also touched on what it would take for a bitcoin ETF to be approved. He believes there won’t be any cryptocurrency ETF until market manipulation and custody are completely fixed:

What investors expect is that the trading in that commodity that is underlying the ETF is trading that makes sense, is free from the risk or significant risk of manipulation. Another thing they really care about, [that] we really care about, is that the assets underlying that ETF... that you have good custody of it, that it's not going to disappear, that the risk in the ETF is truly the risk in the value of the underlying asset, it's not the risk of theft or disappearance. Those two issues are important to me to get comfort on before we would allow an ETF with a digital currency underlying it to go forward.

Could these developments mean that an ETF is coming soon? It’s too soon to tell, but every day it seems more likely that a bitcoin ETF will happen sometime in the future.

Error in Time-Locked Bitcoin Contracts Allows for Miner 'Fee-Sniping'

Michael LaVere
  • Crypto researcher 0xb10c discovered an error in bitcoin "time-locked" transactions that could be used as an attack vector.
  • Miners can take advantage of the program to carry out "fee-sniping" and steal funds from one another. 

Users have discovered an error in bitcoin “timelocked” contracts that could potentially allow miners to steal BTC from one another. 

Anonymous crypto engineer 0xb10c reported discovering more than one million “time-locked” transactions made between September 2019 and March 2020. In a post, 0xb10c detailed how these special bitcoin transactions were not being accurately enforced by the network. 

As opposed to normal transactions, time-locked transactions prevent recipient bitcoin from being accessed after sending. Users must wait for a specific number of blocks to be added to the network in ten-minute intervals before gaining control of their bitcoin. 

0xb10c claimed the errant time-locked transactions provided an attack vector for miners to steal transaction fees  from one another via “fee-sniping.” According to the engineer, the backlog of time-locked transactions were being purposefully designed for a “potentially disruptive mining strategy” involving the theft of miner fees. 

In an interview with CoinDesk, 0xb10c said time-locked transactions represented a “low-priority” problem at present that could eventually balloon to involve the wider network. He explained that fee-sniping would become more lucrative in a few years as the majority of miner income shifts towards transaction fees. 

He continued, 

A fix for this has been released in early 2020. However, it will take a while before all instances of the currently deployed software are upgraded.

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