Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
The CBOE Bitcoin ETF will allow for over-the-counter (OTC) trading for accredited investors while providing them with complete security and insurance.
Being the first company to launch the Bitcoin Futures contract last year in 2017, the Chicago Board Options Exchange (CBOE) has now filed for a Bitcoin-based exchange-traded-fund (ETF) with the U.S securities regulator – the Securities and Exchange Commission (SEC). According to the official release from the SEC, the filing was done last month on June 20, 2018.
The application filed by the SEC asks for a Bitcoin-based ETF to list and trade BTC shares that are backed by the Vaneck Solidx Bitcoin Trust (“the Trust”). The document states that CBOE will only invest in Bitcoin on behalf of the investors. CBOE will also allow for over-the-counter (OTC) trades for accredited investors in the traditional financial market. The application document reads:
“According to the Registration Statement, the Trust will invest in bitcoin only. The activities of the Trust are limited to: issuing Baskets in exchange for the cash and/or bitcoin deposited with the Cash Custodian or Trust, respectively, as consideration; purchasing bitcoin from various exchanges and in OTC transactions; delivering cash and/or bitcoin in exchange for Baskets surrendered for redemption; maintaining insurance coverage for the bitcoin held by the Trust; and securing the bitcoin held by the Trust.”
Before CBOE approached the SEC to file a Bitcoin ETF, two big financial institutions from the crypto space – SolidX and Gemini had already applied for Bitcoin ETF. Besides this, several ETFs filed in 2017 have faced rejection from the SEC owing to issues of price manipulation and lack of overseas regulations. However, much recently, leading digital currency markets like Japan and South Korea have introduced regulatory framework and policies to create a healthy environment in the crypto market. The South Korean recently announced to relax the crypto laws to cooperate with the G20 directives.
Commenting on the rejection of Winklevoss ETF proposal, CoinCenter executive director Jerry Brito said:
“The Winklevoss ETF proposal was rejected because the SEC found that the significant markets for Bitcoin tend to be unregulated overseas markets that are potentially subject to price manipulation. But this creates a chicken and egg problem. How do we develop well-capitalized and regulated markets in the U.S. and Europe if financial innovators aren’t allowed to bring products to market that grow domestic demand for digital currencies like Bitcoin?”
At this time, the argument of SEC for having an overseas regulation stands void and empty. On the other hand, the SEC has also expressed its concern about the lack of insurance for investors. But, according to the official document on Bitcoin ETF presented by CBOE, the exchange operator has assured the SEC of providing insurance and complete security to its investors.
“In addition to its security system, the Trust will maintain comprehensive insurance coverage underwritten by various insurance carriers. The purpose of the insurance is to protect investors against loss or theft of the Trust’s bitcoin. The insurance will cover loss of bitcoin by, among other things, theft, destruction, bitcoin in transit, computer fraud and other loss of the private keys that are necessary to access the bitcoin held by the Trust,” reads the CBOE filing.