SEC has started reviewing comments on physically-backed Bitcoin ETF

The U.S. Securities and Exchange Commission (SEC) has formally started reviewing the physically-backed Bitcoin ETF proposed by VanEck and SolidX.

SEC will consider whether it should approve the fund for listing on CBOE BZX Exchange pursuant to federal securities guidelines. They will be considering around 1,400 Comments during the review. Although CBOE first issued the proposal in June, SEC postponed their decision on the matter and set a new deadline to September 30.

The ETF will differ from current Bitcoin ETFs at the CBOE and other firms because the fund will hold actual Bitcoins instead of futures contracts to bet only on price movements and settle with cash. Investors of the fund will also be insured against loss or theft of the held Bitcoins.

Each share will be worth 25 BTC (more than $160,000 at the current exchange rate) and the fund is open to individual retailers.

While it is claimed that the CBOE and CME Group Bitcoin futures contracts launched in December last year have negatively affected the cryptocurrency prices so far among many other factors, it is hoped that physically-delivered Bitcoin futures might be a little bit different. That's because sellers would deliver the underlying Bitcoin to the buying counterparty at the pre-determined price although this again would expose owners of these Bitcoins to physical market risks than would other kinds of futures. Once approved, therefore, this may be another attempt to send prices skyrocketing. Prices of top cryptocurrencies have generally remained stagnant in the last week with consideration to the momentarily and short-lived rises and falls in some days.

Cash-settled derivatives are much advantageous for anyone who does not want the perceived hustle of physically handling cryptocurrencies and the price difference at the end of the contract is settled in cash. However, they are problematic if there is no consensus over what the true price should be or if the inputs making up the index become prone to manipulation and influence by large entities or vested interests.

Meanwhile, Bitcoin futures might also have worsened market manipulation of cryptocurrency prices. The New York attorney general’s office (OAG) recently released its five-month “Virtual Markets Integrity Initiative," a day before expiration of options exchange CBOE’s bitcoin futures contracts. Kraken cryptocurrency exchange, which was criticized in the report, has argued through a series of tweets that this release could have been targeted at manipulating Bitcoin prices.

Kraken CEO criticized OAG for continuing to try to haunt the company even after it left New York three years ago after the state adopted its controversial “BitLicense” regulatory framework.