Within a week’s time of its temporary withdrawal, the CBOE has re-applied for its VanEck/SolidX Bitcoin ETF proposal with the U.S. Securities and Exchange Commission (SEC) on Thursday, January 30. The official announcement was made by Gabor Gurbacs, VanEck’s digital asset strategy lead, on his Twitter account.
— Gabor Gurbacs (@gaborgurbacs) January 31, 2019
According to the new filing, if the U.S. SEC approves the Bitcoin ETF proposal, it would allow the CBOE BZX Exchange to list the shares of Bitcoin ETF Trust. Investors have been eagerly waiting since long for the arrival of Bitcoin ETF. Analysts predict that the arrival of this crypto investment product will help to usher fresh new liquidity in the market.
The U.S. Government Shutdown, the Reason Behind Pullback
The major reason for the pullback of CBOE’s previous ETF proposal was the ongoing U.S. government shutdown. Also, the U.S. SEC announced that it will put its business on hiatus until the government resumes office. However, despite the pullback, Gurbacs assured of a comeback. He said:
“We are actively working with regulators and major market participants to build appropriate market structure frameworks for a Bitcoin ETF and digital assets in general”.
While the re-filing could instill some confidence among crypto investors, the only issue is that the clock is now reset. Meaning, CBOE submitted the previous proposal last year July 2018. Since then, the SEC continuously delayed its decision taking leverage of the ultimate deadline of 240 days. The final deadline with the SEC as per the earlier application was February 27, 2019.
With the new application, the SEC has still more 240 days to decide on it. Also, note that the proposed rule change is yet to publish in the Federal Register, only after which the SEC’s clock will start tickling. Thus, it could be by the year-end when we can likely see the ETF product trading on a regulated exchange.
SEC In No Hurry for the Bitcoin ETF Approval
The U.S. SEC is most likely to leverage its final deadline of 240 days without giving any additional priority for the ETF approval. As such, SEC Chairman Jay Clayton made it clear that he won’t approve Bitcoin ETF until the crypto exchanges deal with market manipulation.
Two years back in February 2017, Spencer Bogart, a partner at a major crypto investment firm Blockchain Capital, said that if at all the SEC approves the ETF pre-maturely, and the product runs into a major problem, the SEC will have to shoulder complete responsibility for it. Thus, the agency has no motive to rush through the approval process.
Also, if the ETF does well with regards to manipulation, money laundering and investor protection, the SEC doesn’t have any major incentive in it. Bogart said:
“When you think about the game theory aspect of this, if I work at the SEC and I approve this ETF and it goes well, nobody is probably going to come around and pat me on the back and give me a promotion. But if I approve it and a lot of money flows into it, and something goes wrong, I am likely to lose my job.”
Jake Chervinsky, a lawyer at Kobre & Kim shared similar views. According to Chervinsky, the arrival of Bitcoin ETF before the first-half of 2019 is very unlikely.
CBOE has withdrawn the VanEck/SolidX bitcoin ETF proposal (https://t.co/812Ym7U7Hh).
They haven't given a reason yet, but withdrawal implies that they expected denial & didn't want another SEC order setting bad precedent for the future.
There will be no bitcoin ETF in Q1 2019.
— Jake Chervinsky (@jchervinsky) January 23, 2019
Bitcoin ETF Race Is Still On
Despite several reasons to delay the Bitcoin ETF by the SEC, some financial institutions remain undeterred on getting the product to the market. The NYSE Arca has recently completed all its documentation for the Bitwise Bitcoin ETF application. The Bitwise ETF proposal reads that it is in line to prevent major concerns of the SEC like fraud and market manipulation.
The latest application by NYSE Arca might be one of the reasons for a quick filing by CBOE as both players want to get the first-mover advantage.