SEC Seeks Comment on CBOE Bitcoin ETF Filings
The SEC is asking for public comment on two proposed rule changes that, if approved, would lead to the listing of the first-ever bitcoin-based exchange-traded funds.
Released by the SEC on Dec. 28 and Jan. 2 as a way to solicit public input on the proposals, the new documents make public proposed rule changes put forward by the Chicago Board Options Exchange (Cboe) that would exempt its proposed bitcoin ETFs from certain market manipulation rules. Submitted in two filings, on Dec. 15 and Dec. 19, the rule changes relate to advisors and brokers that would seek to support the products when launched.
The two documents would allow Cboe’s exchange to list a total of four ETFs.
Under current regulations, advisors to a company managing funds must have a “firewall” between any brokers or dealers they might be affiliated with. This wall would prevent the advisor and the broker from sharing information about the company’s portfolio. Other rules disallow anyone who manages a fund from using insider information to increase their funds’ worth.
In the documents, Cboe asks for exceptions to the rules because it does not believe bitcoin can qualify as a commodity at risk of being manipulated under the same rules as some existing ones are, noting that price manipulation would require a bad actor to influence the entire blockchain worldwide.
Similarly, due to the nature of the bitcoin network, and its broad, global infrastructure, it would be difficult for any person to have insider trading knowledge on it, the filing claims.
“There is [no] inside information about revenue, earnings, corporate activities or sources of supply; manipulation of the price on any single venue would require manipulation of the global bitcoin price in order to be effective; a substantial over-the-counter market provides liquidity and shock-absorbing capacity; bitcoin’s 24/7/365 nature provides constant arbitrage opportunities across all trading venues; and it is unlikely that any one actor could obtain a dominant market share.”
That said, it still remains to be seen whether the current procedure will clear the way for Cboe to list any bitcoin related ETF products. As reported previously, past attempts at launching a bitcoin-based ETF have met with failure, with the SEC rejecting some filings or forcing other companies to withdraw their filings.
To date, the regulatory body has not approved any bitcoin-based ETFs, though whether the SEC will continue to reject the filings is unclear given that now two different futures products are on the market.
As part of the public comment, the SEC will accept both email and written messages for three weeks after the filings are published in the Federal Register.
CBOE image via Shutterstock
Written by CoinDesk
2017’s Crypto (R)evolution Was Just the Beginning
When we kicked off this year, bitcoin had just topped $1,000 for the first time in three years.
It was a signal to the market, but cryptocurrency still lacked serious interest from mainstream banks and institutional investors. Today, we’re looking at a very different market and, as one of the largest liquidity providers in the space, Cumberland has had a front row seat to the evolution — or revolution, depending on your perspective.
Over the last several years, anyone who was following cryptocurrency or involved at all in the markets alluded that “Wall Street” was coming. This was the year we actually saw this start to happen, driven by the new ventures, burgeoning demand and market maturation that generally accompany a rapid run up in price.
Real dollars are put to work
2017 was an inflection point.
We saw a shift from getting familiar with cryptocurrencies to putting real dollars to work — a shift from education to action that was evident throughout the activity we saw in the crypto markets. Bitcoin and other top cryptocurrencies saw their valuations grew consistently over the first half of the year and, as we entered the back half of the year, prices reached all-time highs over and over again, with year-over-year market cap figures growing over 4,000%.
The end-of-the-year headlines are telling the story of volatility (those of us who have been in these markets for some time know that volatility defines them — and, indeed, all nascent markets), but the fact remains we’ve seen prices up 1500% this year. And demand to invest real, new money has followed.
Realizing that bitcoin is here to stay, CME, CBOE and Nasdaq all announced plans to list bitcoin futures contracts, with a race to get the first product listed. CME and CBOE have already launched and have active market participants.
Historically, adding derivatives to a spot market has been an indication of maturity, and we see these contracts as a natural progression in the expansion of bitcoin (and all cryptocurrencies) as an asset class.
These developments also signal that action will only continue, as futures have been a known precursor to an ETF — and NYSE and CBOE have both announced plans to list. Futures and ETFs are familiar to institutional money, and many investors who have been on the sidelines are using these products to gain exposure to cryptocurrencies.
Market players change face
Bitcoin has always had a diverse group of followers, historically made up of early adopters, crypto-centric companies, individual traders, high net-worth individuals and a small group of institutional traders like Cumberland.
But it’s the birth of the crypto-specific hedge fund that has really signaled a trend from education to action among institutional capital. At Cumberland, we saw these funds emerge this year in truly meaningful numbers, from a handful in 2016 to around 70 in the middle part of this year to now more than 120 and growing, a figure which represents approximately 1 percent of all hedge funds globally.
We’re seeing everything from early crypto-enthusiasts who did well for themselves now running funds to the more established funds turning their full-time focus on cryptocurrencies.
From our perspective, it’s a trend that shows no signs of slowing down in 2018.
We’re also seeing the changing face of the cryptocurrency investor reflected in the shifting landscape between early crypto movers — let’s call them bitcoin 1.0 — and newer users or bitcoin 2.0.
Both groups are ultimately trying to achieve the same goal – making bitcoin scalable, secure and usable, and making it the largest decentralized network for the movement of value. We have seen some significant developments over the last year which brought about different solutions, with one ultimately creating bitcoin cash. It remains to be seen which philosophy will come out on top and what that means for the continued mainstreaming of the asset.
Ecosystem builds on bitcoin
We also saw a shift this year as the interest in bitcoin gave rise to interest in other cryptocurrencies, with a cottage industry of new products and services emerging around them.
As people embraced bitcoin and ether, other cryptocurrencies began to attract investors, which eventually led capital into different and diverse projects. If you didn’t like certain attributes of bitcoin for whatever reason, other tokens and protocols were more readily available in 2017 than ever before, and this demand came sooner than was really expected.
There are thousands of cryptocurrencies that exist today for a wide array of utilities and use cases, and over the last year, we have seen an increase in demand for these cryptocurrencies. We believe that an overall interest in decentralized technologies, community investment and collaboration, and the dramatic increase in the market capitalization of the crypto ecosystem have all fueled this acceleration.
This year’s action also gave rise to ICOs, an entirely new layer to the ecosystem. We’ve seen the number of ICO white papers increase dramatically over the last year as entrepreneurs look to fund a dizzying array of projects.
According to Icodata.io, the number of funds raised increase by over 6,000% and the number of deals issued increase by over 2,500% year-over-year.
Action to adoption
If 2017 was about education turning to action, 2018 is about action turning to adoption. 2018 could set the stage for white papers converting into production-grade products.
Right now, investors are still exploring what their strategy will ultimately be — despite the giant increase in demand this year, a lot of it was more dipping a toe in than making a big splash. Looking at the year ahead, we expect to see the institutional capital magnified, with cryptocurrencies more fully established as an asset class.
More crypto-funds popping up, more institutions making crypto a key part of their strategy, more jurisdictions providing regulatory clarity. And to be clear, many of the ideas and projects in the marketplace will fail, but may give rise to better developed ideas and projects down the line.
While it’s still early days and no one knows with certainty how this will all play it, I expect it will be fascinating ride — and Cumberland is looking forward to being here at every step.
Written by CoinDesk
Cryptocurrency Mining Soars in Vietnam – Over 7000 Rigs Imported
The Ho Chi Minh City Customs Department has revealed that 7,005 bitcoin mining rigs cleared customs from the beginning of 2017 to the middle of December, local publications reported.
Previously, the department announced that it received 98 import declarations for 1,478 mining rigs from January 1 to October 31, valued over $2,182 million, Dan Tri reported.
Then, from the beginning of November to December 21, 2017, the number of mining rigs imported into Vietnam jumped by another 5,527, making the total number of rigs imported 7,005 in total. The 5,527 machines were mostly brought in from China through 8 organizations and individuals, the news outlet noted.
Mining Rigs Not Prohibited
The General Department of Vietnam Customs previously requested the State Bank of Vietnam, the Ministry of Information and Communication, and Ministry of Industry and Trade to comment on the import of mining rigs. The central bank confirmed that mining rigs for bitcoin and other cryptocurrencies are “not related to the use of virtual currency as a means of payment.” As such, they are “not part of the management functions and tasks of the State Bank.”
Subsequently, the General Department of Customs issued a notice clarifying that mining rigs are not on the list of prohibited items. Viet Times elaborated:
After the customs announced that bitcoin mining rigs are not on the list of goods banned from import in accordance with the state regulations, the number of machines imported in the last two months of the year has soared to more than 5,000 machines.
Mining Rigs Could be Prohibited in the Future
Deputy Director of the State Bank of Vietnam, Nguyen Hoang Minh, said that bitcoin and other cryptocurrencies are “not a legal means of payment in Vietnam. Therefore, the issuance, supply, use of bitcoin and other similar virtual currency as a means of payment is prohibited,” Vietnam Biz conveyed.
Some businesses and individuals are concerned that the import of mining rigs will also be prohibited, the news outlet noted.
The Ho Chi Minh City Customs Department has already recommended General Department of Vietnam Customs “not to import these types of machinery,” according to Dan Tri. However, so far “the General Department of Customs has exchanged documents” with relevant departments concerning the import of mining rigs.
Do you think the Vietnamese government will start prohibiting the import of mining rigs? Let us know in the comments section below.
Images courtesy of Shutterstock.
Written by CoinDesk
South Korea Law Firm Fights New ‘Unconstitutional’ Crypto Trading Regulations
Seoul-based law firm Anguk Law Offices announced Tuesday that it had filed a constitutional appeal on Dec 30 over the South Korean government’s recent cryptocurrency trading regulations, calling them an “infringement of property rights”, The Korea Times reports.
The appeal argues that the latest government regulations of cryptocurrency trading released last week, which seek to make trading of virtual currencies in South Korea non-anonymous, are “unconstitutional”.
Anguk Law Offices argues that since cryptocurrency is not officially considered a currency or financial instrument in South Korea, there is not an applicable financial law in place to govern the trading of them.
Jeong Hee-chan, a lawyer at the law firm, told reporters that the status of virtual currencies — whether it’s property, a commodity, or another kind of asset — must be decided before regulations are put in place:
“We agree that regulations are necessary. But regulation should come after related laws are implemented. The petition is also a request for the government to respect people’s property rights and introduce regulations after reaching a social consensus.”
On Dec. 28, the South Korean government announced its plans to ban the use of anonymous virtual accounts for cryptocurrency trading in an effort to “curb virtual currency speculation”, local news agency Yonhap reported.
According to The Korea Times, most crypto exchanges in South Korea currently use virtual accounts linked to their bank accounts, as they make it easier for exchanges to manage clients’ money.
Starting as early as Jan. 20, clients will have to use only real-name bank accounts and accounts at cryptocurrency exchanges must have matching names in order to be used for deposits and withdrawals, the publication reports.
FOMO-drive “cryptocurrency mania” in South Korea was credited with Ripple’s notable growth in the past week, which propelled the altcoin to become the second largest cryptocurrency by market capitalization.