Clock Starts Ticking for SEC to Review NYSE Arca’s Bitcoin ETF Rule Change Proposal

Francisco Memoria

The US Securities and Exchange Commission (SEC) has recently revealed it has started to review a bitcoin exchange-traded fund (ETF) rule change proposal filed by NYSE Arca and Bitwise Asset Management earlier this month. The regulator now has 45 days to make an initial decision.

In it, the SEC may decide to approve, reject, or extend the proposal. The regulator can extend the period to make its final decision up to 240 days, and members of the general public looking to file responses to the proposal have three weeks to comment.

NYSE Arca, which focuses on trading stocks and options rather than large-cap stocks traded on the New York Stock Exchange, has filed a bitcoin ETF application with the SEC along with Bitwise earlier this year. If approved, the financial product, set to rely on “third party custodians to hold its physical bitcoin,” will be traded on its platform.

The rule change proposal was filed the same day the bitcoin ETF application was, but due to the US government’s shutdown the SEC didn’t publish it in the Federal Register, which meant it wasn’t yet being examined. It was published this Friday, February 15.

The Fight for a Bitcoin ETF

Various cryptocurrency investors believe a bitcoin ETF will be beneficial for the market, as they believe it’ll bring in institutional investors and increase its liquidity. The SEC has yet to approve such an ETF, and has in fact rejected several applications, including one from the Winklevoss twins.

Recently, however, SEC commissioner Robert Jackson stated a bitcoin ETF is “virtually certain,” giving the community hope a proposal will sooner or later meet the SEC’s guidelines. Recently, the VanEck-SolidX ETF proposal was withdrawn over concerns related to the government’s shutdown.

Soon after, however, the proposal was resubmitted. This has seen the clock restart, meaning the SEC will have up to 240 days to make a decision after the ETF proposal is published on the Federal Register. It hasn’t been published yet.

Could President Trump Ban Bitcoin? Experts Weigh In

  • Experts weigh in on the possibility of President Trump banning bitcoin.
  • Increasing concern over libra and large platform digital currencies is driving political agenda. 

Following last week’s attack on bitcoin and Facebook’s libra, experts have voiced their opinion on whether US President Donald Trump could realistically impose a ban on cryptocurrency. 

Not a Fan of Bitcoin

On July 11, President Donald Trump published a series of tweets attacking bitcoin and digital currencies, while championing the dollar. 

President Trump’s comments come in the midst of growing concern over Facebook’s libra, as political regulators around the world scramble to enact policies to deal with the rise of digital currencies. 

Members of the crypto community have questioned the impact of the US President taking an unfavorable stance towards bitcoin. Some crypto pundits predicted the tweets would be good for the price of BTC and ultimately increase exposure to cryptoassets. However, others worry that political influence may lead to a crackdown on cryptocurrency usage. 

Scenarios for Banning Crypto

Alex Kruger, economist and market analyst, published a tweet thread examining the legality and possibility of President Trump banning bitcoin. 

According to Kruger, It would be almost impossible for the US government to outlaw bitcoin as a technological instrument. Aside from the Herculean task of eradicating a decentralized, digital technology, bitcoin is code, which is protected under the first amendment.

However, that same protection is not extended to third-party operators, including cryptocurrency exchanges. 

Kruger quoted Abra CEO and Founder BIll Barhydt, who explained in a Forbes article how the government could target fiat onramps to exchanges, 

“You can’t prevent people from holding ones and zeroes on a device in their pocket. That ship has sailed. We already know that. The question is: What can they do at the edge of the network -- the onramps and offramps, the places where they exert control over the banking system, the exchanges, [and the] stablecoins.”

The US government could prevent retail investors from having access to crypto-assets through exchanges and prevent banks from allowing transfer of funds. Users would still be able to buy crypto through alternative channels, but the current ease of investing would be severely hampered. 

Unlikely, But Not Impossible

President Trump could also issue an executive order banning citizens from dealing in bitcoin, similar to the one he issued against the Petro. While there is a precedent for this route, Kruger claims the order could be easily overturned by Congress, 

Ultimately, Kruger believes that it is unlikley the President or Congress would move to ban bitcoin, and it would be difficult to enact fool-proof policy. However, it's worth considering the political landscape as regulatory concerns mount over Facebook's libra.

Just last week, a copy of a bill reportedly drafted by the House Financial Services Committee surfaced online, under the title "Keep Big Tech Out of Finance." The bill would put an end to Facebook and other large platforms from issuing digital currencies without incurring a severe penalty.

The same could be extended to bitcoin in the event the government finds crypto-assets no longer tolerable for the general public.