U.S. SEC rejects Valkyrie, Kryptoin Bitcoin trusts(reuters.com)
reuters.com
U.S. SEC rejects Valkyrie, Kryptoin Bitcoin trusts
https://www.reuters.com/markets/funds/us-sec-rejects-valkyrie-kryptoin-bitcoin-trusts-2021-12-23/
55 comments
It’s weird to me they approve futures based ETFs, that are terrible for investors seeking BTC exposure (lose money due to roll), and approve closed end funds like GBTC that are also worse for investors due to inability to track spot price (its been stuck in a serious discount for nearly a year, prior to that it was in a massive premium, both have screwed plenty of people who bought it). But somehow an actual plain, direct, spot ETF that can provide redemptions to authorized participants is the one that’s not allowed.
> But somehow an actual plain, direct, spot ETF that can provide redemptions to authorized participants is the one that’s not allowed.
Custodianship is probably why they’ve rejected direct spot ETFs that own real bitcoins. It would be disastrous if hacked. There’d be no restitution for investors.
With futures-based bitcoin products, no one is actually holding bitcoins. It’s cash settled between the long and shorts based on a published closing price. So the BITO ETF has no risk of being irreparably hacked.
Custodianship is probably why they’ve rejected direct spot ETFs that own real bitcoins. It would be disastrous if hacked. There’d be no restitution for investors.
With futures-based bitcoin products, no one is actually holding bitcoins. It’s cash settled between the long and shorts based on a published closing price. So the BITO ETF has no risk of being irreparably hacked.
We don't have to speculate. The SEC has stated their reasons. They are concerned mainly about market manipulation, not custodianship.
Sorry what are the reasons?
I think you’re overlooking the part of their statements where they have repeatedly emphasized investor protections.
Some of the different ETFs are filed under different legislations, and the SEC claim that the Investment Company Act of 1940 provided better investor protections than the Securities Act of 1933, but I’m unclear of what particular stipulations make that so.
Some of the different ETFs are filed under different legislations, and the SEC claim that the Investment Company Act of 1940 provided better investor protections than the Securities Act of 1933, but I’m unclear of what particular stipulations make that so.
The bitcoin ETFs on CME are cash settled. Plunge protection team likely feels safer with cash settled 'btc' than physically settled, because people can't stand for delivery to break the back of PPT manipulators.
It appears cash settled futures were put in place in 2017 specifically to break the bull market in btc at that time. It worked.
It appears cash settled futures were put in place in 2017 specifically to break the bull market in btc at that time. It worked.
> It appears cash settled futures were put in place in 2017 specifically to break the bull market in btc at that time. It worked.
The price was totally unsustainable given the amount of supply entering the market daily due to mining. An insane amount of money would have had to flow into bitcoin every day to sustain those prices. At least, insane given the size of the bitcoin market at the time. There is no need for any other explanation for why the bull market ended in early 2018.
The price was totally unsustainable given the amount of supply entering the market daily due to mining. An insane amount of money would have had to flow into bitcoin every day to sustain those prices. At least, insane given the size of the bitcoin market at the time. There is no need for any other explanation for why the bull market ended in early 2018.
It's because (in the SEC's view) crypto spot markets are highly manipulated but futures markets aren't.
This is a nonsense position, though. Crypto futures markets track spot markets. It doesn't make the slightest bit of sense to allow futures and not spot. If spot is manipulated, so are futures.
Cme btc futures can be spot settled if you can find a willing counterparty for an otc block trade.
I really don't understand the logic of this. The futures markets follow the spot market. If there's manipulation of the spot markets that is so short term that it doesn't affect the futures markets, it shouldn't affect a spot ETF either. And if there's manipulation of the spot markets that is long term, it will affect the futures markets just as much as a spot ETF. What kind of manipulation is the SEC specifically worried about that would affect a spot ETF but not the futures market?
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> spot markets are highly manipulated but futures markets aren't
If the spot market is manipulated, the futures will reflect the manipulated price. Though the SEC doesn't come out and say it, it looks like this is a concern around custodianship.
Bitcoin futures are hedged at the periphery. If a trader loses their Bitcoin, they are unhedged and go broke through usual channels. Bitcoin ETFs hold that risk at the centre. If they lose their Bitcoins, we have to deal with trading halts and moms-and-pops losing their shirts and the family office that quintuple-leveraged their ETF bet and is threatening to take out a bank.
If the spot market is manipulated, the futures will reflect the manipulated price. Though the SEC doesn't come out and say it, it looks like this is a concern around custodianship.
Bitcoin futures are hedged at the periphery. If a trader loses their Bitcoin, they are unhedged and go broke through usual channels. Bitcoin ETFs hold that risk at the centre. If they lose their Bitcoins, we have to deal with trading halts and moms-and-pops losing their shirts and the family office that quintuple-leveraged their ETF bet and is threatening to take out a bank.
Why wouldn't they come out and say it?
> Why wouldn't they come out and say it?
Gives the applicant space to cure the concerns and the SEC room to reverse in the future.
Gives the applicant space to cure the concerns and the SEC room to reverse in the future.
Plenty of options if you can access Canadian markets. Generally I would not recommend due to high fees and probably ??? tax situation.
taxes should be fine as there are no dividends. High fees depends on the broker. Interactive Brokers has good canadian coverage. The issue I have seen is more to do with FX rates offered by retail brokers arent great.
its happenstance
https://news.ycombinator.com/item?id=29666409#29667640
https://news.ycombinator.com/item?id=29666409#29667640
I believe we will see significant changes to the laws around that next year.
If time permits, I highly suggest to listen to the full hearing congress did on cryptocurrencies two weeks ago [1].
It did seem to me that a good portion of congressman/woman were in favor of new rules for the industry and its interactions with the traditional financial system. Most were concerned about keeping the dominance of the USD long term on the global financial system.
[1] https://www.youtube.com/watch?v=F_kZELcynKQ
It did seem to me that a good portion of congressman/woman were in favor of new rules for the industry and its interactions with the traditional financial system. Most were concerned about keeping the dominance of the USD long term on the global financial system.
[1] https://www.youtube.com/watch?v=F_kZELcynKQ
> Most were concerned about keeping the dominance of the USD long term on the global financial system.
I’ve found being the best product on the market to be the best way of ensuring one’s dominance.
I’ve found being the best product on the market to be the best way of ensuring one’s dominance.
In that case BTC will never rise to the top.
That's not a very helpful thing to say. Most of the obvious explanations for why BTC supposedly isn't good are easily debunked (and have been a thousand times already). It would be more helpful to give a specific criticism of BTC that is actually interesting (i.e., cannot be correctly dismissed in two sentences).
I have too much faith in humanity to believe that the thing which beats out every other clearinghouse over sufficiently long timescales will be “dedicate unimaginable amounts of compute to find one meaningless number and in doing so commit 1Mb of data every 10 minutes (slower than ancient dial-up connections)”.
I clearly don’t know what that better thing will be (I have some vague ideas…), but still I can’t convince myself that Bitcoin will ever be humanity’s best-engineered clearinghouse.
I clearly don’t know what that better thing will be (I have some vague ideas…), but still I can’t convince myself that Bitcoin will ever be humanity’s best-engineered clearinghouse.
Bitcoin is like the "http://" of cryptocurrency. Public balances, public transactions. We need that little "s" on the end. Taproot doesn't come anywhere close. Monero and PirateChain are the leading "https://" contenders, in my opinion. There is lots of competition in the privacy coin space so everyone will have different opinions here.
Also, guns.
mistrial9(1)
Nah being the only product for which you can pay in taxes, at pain of men with guns putting you in a tiny box, is the best of ensuring dominance. Over the domestic population, at least.
This is a folk rationale but it doesn't hold much water. If you look at countries with weak currencies, being the currency that taxes are paid in or that the people with the guns are telling you to use, doesn't ensure a stable currency at all. Quite the reverse in fact, the need to threaten people into using a country's currency indicates severe weakness.
Stability and (domestic) dominance are two different things.
More like a product that isn't highly volatile, has FDIC backing to cover losses and whose direction isn't controlled by a handful of private individuals who control the mining and set the direction of the underlying software.
How do I file a claim with FDIC to cover the inflationary losses of my USD currency?
This is a silly argument considering the widespread adoption of the USD for international trade, well beyond the oil industry.
You're right, if I held all Euros which are used in something like 33% of worldwide forex trades, then everything would be dandy and the government wouldn't mind at all that I wasn't paying in dollars. That's why every American has lots of Euros.
The dollar isn't better managed than all the other currencies. It's a network effect of debt denominated in USD, one of the most relevant of which is that taxes for about 25% of global GDP is paid in dollars.
The dollar isn't better managed than all the other currencies. It's a network effect of debt denominated in USD, one of the most relevant of which is that taxes for about 25% of global GDP is paid in dollars.
If you need dollars, you can exchange your euros for dollars seconds before paying whatever.
If the government had a problem with that, something drastic would've changed.
You can speculate that the US will deteriorate into a state where there will be currency controls and stuff, but in our lifetimes, it hasn't been like that.
People say, or used to say, a lot, that oil being denominated in dollars meant something. I mean, that the choice of units has great economic value, somehow. But nobody's denying that you can exchange one currency for another at any time, right?
If the government had a problem with that, something drastic would've changed.
You can speculate that the US will deteriorate into a state where there will be currency controls and stuff, but in our lifetimes, it hasn't been like that.
People say, or used to say, a lot, that oil being denominated in dollars meant something. I mean, that the choice of units has great economic value, somehow. But nobody's denying that you can exchange one currency for another at any time, right?
I think the best thing this Congress can do in a year is pass a law about forming committee to do a study.
If you really want to play the game, prewrite the law you want and jam it into a debt ceiling bill that congress has to pass.
If you really want to play the game, prewrite the law you want and jam it into a debt ceiling bill that congress has to pass.
> It’s weird to me they approve futures based ETFs ...
When your friends want to buy in low, you let big money short the hell out it.
When your friends want to buy in low, you let big money short the hell out it.
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SEC: absolutely fine with penny stocks with 1000% daily fluctuations
SEC: derivatives of a trillion dollar asset are risky
This is all a theater. The real reason is they are trying to slow down the proliferation of cryptocurrencies.
SEC: derivatives of a trillion dollar asset are risky
This is all a theater. The real reason is they are trying to slow down the proliferation of cryptocurrencies.
No, the SEC generally tries to limit the blast radius of things. Most people are not day-trading penny stocks. And other tools like accredited investor status are also used to (bluntly) limit the blast radius of risky actions.
Poorly regulated derivatives were what caused the last financial crisis.
Poorly regulated derivatives were what caused the last financial crisis.
And options that have a 15% spread and rip the face off retail investors are ok?
Total nontransparent markets such as the pink sheets? Fingerprinting VWAP trades by institutions and then front running them?
SEC likes to protect the status quo
Total nontransparent markets such as the pink sheets? Fingerprinting VWAP trades by institutions and then front running them?
SEC likes to protect the status quo
>And options that have a 15% spread and rip the face off retail investors are ok?
You say that like there was somebody malign doing that.
>Total nontransparent markets such as the pink sheets?
Or that.
Absence of people to trade with is not something that someone is doing to you.
If you choose not to go the grocery store, but instead see if anyone is selling anything on a random street corner, whose fault is that?
Hey, sometimes there's someone with steaks they have to get rid of fast because the A/C on their truck broke.
You say that like there was somebody malign doing that.
>Total nontransparent markets such as the pink sheets?
Or that.
Absence of people to trade with is not something that someone is doing to you.
If you choose not to go the grocery store, but instead see if anyone is selling anything on a random street corner, whose fault is that?
Hey, sometimes there's someone with steaks they have to get rid of fast because the A/C on their truck broke.
Then why is crypto open to so many other first world countries?
They've not got round to action yet?
UK is taking a bit of action: https://edition.cnn.com/2021/12/22/football/arsenal-socios-a...
https://www.fca.org.uk/publications/policy-statements/ps20-1... / https://www.fca.org.uk/publication/policy/ps20-10.pdf
"We are prohibiting the marketing, distribution and sale in or from the UK to all retail clients, of derivatives and ETNs that reference certain types of unregulated, transferable cryptoassets"
UK is taking a bit of action: https://edition.cnn.com/2021/12/22/football/arsenal-socios-a...
https://www.fca.org.uk/publications/policy-statements/ps20-1... / https://www.fca.org.uk/publication/policy/ps20-10.pdf
"We are prohibiting the marketing, distribution and sale in or from the UK to all retail clients, of derivatives and ETNs that reference certain types of unregulated, transferable cryptoassets"
Regulatory authorities are free to make independent judgements of their own.
The US bans haggis, and the EU bans Mountain Dew, and few people bat an eye.
The US bans haggis, and the EU bans Mountain Dew, and few people bat an eye.
Yes, but it is almost happenstance that the SEC gets a say on these at all.
The US stock markets are largely permissionless from the regulatory perspective. The SEC is not in place to make a judgement on the merit of an asset. But when you operate a fund, with a fund manager, that takes custody of retail assets, now they are in a gatekeeping position. Its a combination of Acts that never envisioned “ETFs” at all, let alone “digital asset commodity exchange traded products”
So the laws have to be updated to get them back out the way. The SEC itself had a comment period on this but it was largely missed.
The US stock markets are largely permissionless from the regulatory perspective. The SEC is not in place to make a judgement on the merit of an asset. But when you operate a fund, with a fund manager, that takes custody of retail assets, now they are in a gatekeeping position. Its a combination of Acts that never envisioned “ETFs” at all, let alone “digital asset commodity exchange traded products”
So the laws have to be updated to get them back out the way. The SEC itself had a comment period on this but it was largely missed.
> US stock markets are largely permissionless from the regulatory perspective
By default, every securities transaction in the U.S. requires SEC approval [1]. There is a long list of exemptions, a list which the SEC maintains, that permit e.g. the private markets.
In this sense, the U.S. took an ersatz European regulatory approach. It is obsessively permissioned. It was a drastic response to a drastic crisis--Black Thursday and the Great Depression.
[1] https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-188...
By default, every securities transaction in the U.S. requires SEC approval [1]. There is a long list of exemptions, a list which the SEC maintains, that permit e.g. the private markets.
In this sense, the U.S. took an ersatz European regulatory approach. It is obsessively permissioned. It was a drastic response to a drastic crisis--Black Thursday and the Great Depression.
[1] https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-188...
The exceptions are the rule
But less vague, “approval” doesnt mean judgement was pased and gatekept, approval means that disclosures are made and investors can make their own decisions with that level of disclosure. And then there are exceptions to that where the SEC gatekeeps and likes that power
But less vague, “approval” doesnt mean judgement was pased and gatekept, approval means that disclosures are made and investors can make their own decisions with that level of disclosure. And then there are exceptions to that where the SEC gatekeeps and likes that power
> SEC: derivatives of a trillion dollar asset are risky
It's actually sillier than this. They think that derivatives of bitcoin are fine (futures ETF approved) while simultaneously saying bitcoin itself is too dangerous (spot ETF denied).
It's actually sillier than this. They think that derivatives of bitcoin are fine (futures ETF approved) while simultaneously saying bitcoin itself is too dangerous (spot ETF denied).
The comment that managing actual bitcoin is too risky makes sense to me, even if it's unclear that's the SEC's rationale.
People say, oh oh oh, GBTC and other substitutes don't track bitcoin. Well, yeah, maybe that's nature's way of telling you that keeping actual bitcoin safe is expensive. Pay your money and take your chances.
People say, oh oh oh, GBTC and other substitutes don't track bitcoin. Well, yeah, maybe that's nature's way of telling you that keeping actual bitcoin safe is expensive. Pay your money and take your chances.
The SEC must know something many other modern, first world countries do not because when I try to use most crypto apps, it says it's unavailable for US citizens, along with places like Yemen and North Korea.
If you live in NY state, your government blocked you from using all kinds of crypto platforms. I live in a more free state that doesn't have such problems.
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