Crypto-lawyer tweetstorm pours cold water on VanEck/SolidX bitcoin ETF hopes
A noted crypto-commentator has given a gloomy outlook on the chances of VanEck/SolidX's ETF proposal getting the thumbs up in February.
One of the big cryptocurrency narratives of 2018 has been the initial expectation, and eventual disappointment, surrounding the US Securities Exchange Commission (SEC) approval of a bitcoin Exchange Traded Fund. Such a fund, goes the general consensus, would bring many more 'Main Street' (i.e. general consumer) investors into the crypto space, increase demand among institutional investors and bring a much more general air of respectability to the crypto market.
For a whole host of reasons, however, no such approval has been forthcoming. A series of rejections through the course of the year – including a rejection for Gemini, the Winklevoss-led exchange, and a day that saw no-less than nine dismissed in one fell swoop – with the last-ETF-standing being the proposal from VanEck/SolidX. That decision, first postponed until December back in late-September, was then postponed again last week – this time with a deadline of February 27th, 2019.
In the last few hours, however, noted cryptocurrency lawyer and Twitter commentator, Jake Chervinsky, has seen fit to put together a 20-tweet thread outlining why he thinks the chances of any such approval coming in that kind of timeframe is pretty remote.
His central thesis, resolves around the major concern of the SEC: the manipulation of the bitcoin prices on unregulated exchanges. Chervinsky sees the most important of the questions raised by the SEC in its comments on the ongoing VanEck decision as being related to whether the exchange proposing to host the ETF, the Chicago-based CBoE, has a "a surveillance-sharing agreement with a regulated market of significant size."
This, basically, is a query regarding whether CBoE is sourcing its pricing from a regulated exchange. And, beyond that, does it have access to that exchange's order book data so it could potentially hand it over to the SEC in order to satisfy it that well-known nefarious trading practices – like wash trading (fulfilling your own orders) and spoof orders – are not being used to manipulate the price of the futures. This concern for being able to trust the pricing of bitcoin and other cryptocurrencies has been at the heart of pretty much all of the rejections so far. It is also something that VanEck/SolidX team has sought to address of late – both in its response to the SEC and in VanEck's plans to chart Over The Counter (OTC) trading prices.
It is Chervinsky's belief, though, is that the end game of the SEC is to get firms wishing to market ETFs to become de facto monitors of the many crypto exchanges that are currently, actively trying to avoid coming under its purview – and that the criteria that they have set are so vaguely defined, that they will continue to reject applications until either new price discovery options come online, or the exchange acquiesce to the demands of prospective ETF providers. He then asserts that, until the SEC is satisfied that the pricing issue is resolved, and it can trust the sources, the chances of an approval are minimal.
in fact, right now he reckons the chances are "about 10%", with the big question being how much higher can it get before February 27th?
0/ Last week, the SEC delayed its decision on the VanEck/SolidX bitcoin ETF for the last time. With a *final* deadline set for February 27, let's discuss:— Jake Chervinsky (@jchervinsky) December 10, 2018
- key updates from the past few months
- how to interpret this delay
- my prediction on what the SEC will decide
15/ Both CBOE and SolidX make great points about the surveillance-sharing agreements they've entered & the increasing maturity of the bitcoin markets.— Jake Chervinsky (@jchervinsky) December 10, 2018
They include a particularly good argument about the role of OTC trading, a subject that @gaborgurbacs can tell you more about.