The U.S. Securities and Exchange Commission (SEC) is closing in on the idea of giving the go-ahead of a bitcoin-based exchange-traded fund (ETF). All the commission needs to kickstart the initiative is more endorsement and the accompanying expert opinions.
SEC is now interested in a deal featuring a proposal made by Cboe, a company that wants to list and trade the SolidX Bitcoin Shares, an ETF, which was originally the idea of VanEck SolidX Bitcoin Trust.
The trust will seek to carry out investments exclusive to Bitcoin, as Cboe’s filings have revealed. The Trust will only serve as a vehicle to allow investors to swap money for bitcoin, but the organization itself will not engage itself with managing it.
SEC is now seeking the opinion of potential investors who are interested in the proposal. Amid the overall gloom about cryptocurrencies, VanEck CEO Jan van Eck has remained largely upbeat about the nature of bitcoin. According to him, bitcoin is a legitimate investment option. He even compared it to a type of digital gold, allowing investors to create diverse portfolios.
SEC and Cryptocurrencies – A Fraught Relation
All talks about the fund aside, the policy championed by SEC with regards to alt-coins and initial coin offerings (ICO) is rather confusing. The commission is still dithering over giving these assets a clear legal status, which may allow investors to pursue investment more actively and in a manner that is agreeable to everyone – i.e. legally.
According to TD Ameritrade who spoke to CNBC, JJ Kinahan, nobody was “quite sure what the rules were.” Meanwhile, SEC Chairman Jay Clayton riposted that the rules that determine what constitutes a security have been “pretty clear”, leaving little room for doubt.
Doubt, however, there is an SEC’s interpretation of a security is still very much a matter of interpretation. However, Clayton shed some light in his interview for CNBC, saying that when “people are investing in with the expectation of a return, that is an investment and a security”.
Clayton also argued that SEC isn’t going to change the way it defines securities just because new technologies have been unable to adapt. More specifically, he said:
“I understand that there is a great deal of discussion about those crypto assets, but again we are not going to relax our rules based on the level of discussion. We need to know that the pricing is certain. We need to know that the assets are there. We need to know it’s going to function as our retail investors would expect those products to function.”
What Does the Future Bode?
Leaving SEC to push ahead with its current definition of a security may indeed prove difficult for investors who want to pursue cryptocurrencies, as defining the value of their assets will be difficult and a subject to constant market fluctuations.
However, before long, it’s likely that SEC will itself step in and start enforcing its regulations. As ICOs are understood as securities, the commission will have the right to exercise the full right of the law in at least these occasions.