SEC postpones Bitcoin ETF decision causing temporary chaos on values

The US Securities and Exchange Commission (SEC) has issued a statement confirming its postponement until the end of next month at the latest their decision whether to approve or disapprove the listing of a Bitcoin-backed exchange-traded fund (ETF).

“The Commission, pursuant to Section 19(b)(2) of the Act 6 designates September 30, 2018, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change,” the official statement reads.

VanEck’s application

The ETF proposed by the VanEck SolidX Bitcoin Trust contemplates the issuance of individual shares of 25 Bitcoins in baskets of five shares each. The fund has an element of security because it will hold its Bitcoins in cold wallets.

“The VanEck SolidX Bitcoin Trust will issue VanEck SolidX Bitcoin Shares, which represent units of fractional undivided beneficial interest in and ownership of the Trust,” says the firm’s application to the SEC.

“The investment objective of the Trust is for the Shares to reflect the performance of the price of Bitcoin, less the expenses of the Trust’s operations. The Trust is not actively managed.”

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It also explains that the Trust’s assets will consist of Bitcoin, although it adds that it “will occasionally hold cash for short periods in connection with the purchase and sale of Bitcoin, and to pay Trust expenses. The Trust will be responsible for custody of the Trust’s Bitcoin”.

What are ETFs?

ETFs can be traded on the market similarly to regular company shares and are typically composed to track an index. Other ETFs, according to Cryptobriefing, are designed to track commodities or other assets like gold or bonds.

The advantage of ETFs is that the funds provide a simplified way of investing in commodities without having to be concerned over constituent units.

Crypto price reaction

The SEC’s decision to postpone Cboe BZX Exchange’s application for the VanEck Bitcoin Shares sent all major cryptocurrencies on a downward spiral. Bitcoin alone lost over $500 (£389) of its value and at one point was priced at just under $6,500 (£5,052).

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Most currencies have lost anywhere between nearly 10% to 15% of their value since the SEC announced its decision to postpone its final ruling.

Last month, the SEC denied a second attempt by Tyler and Cameron Winklevoss, founders of crypto exchange Gemini, to list and trade shares of what would have been the first Bitcoin ETF in history.

Among the arguments to reject the Winklevoss Twins’ application the SEC said it did not support their argument that Bitcoin markets, including Gemini, are resistant to manipulation. The commission also highlighted issues of fraud and investor protection.