U.S. SEC rejects Valkyrie, Kryptoin Bitcoin trusts

https://www.reuters.com/markets/funds/us-sec-rejects-valkyrie-kryptoin-bitcoin-trusts-2021-12-23/

99 48 5 years ago

erentz• 5 years ago

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.

Scoundreller2• 5 years ago

Plenty of options if you can access Canadian markets. Generally I would not recommend due to high fees and probably ??? tax situation.

antb1232• 5 years ago

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.

vmception4• 5 years ago

its happenstance

https://news.ycombinator.com/item?id=29666409#29667640

hatesinterviews2• 5 years ago

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.

modeless3• 5 years ago

We don't have to speculate. The SEC has stated their reasons. They are concerned mainly about market manipulation, not custodianship.

landemva• 5 years ago

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.

javert2• 5 years ago

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.

wmf• 5 years ago

It's because (in the SEC's view) crypto spot markets are highly manipulated but futures markets aren't.

darawk• 5 years ago

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.

modeless3• 5 years ago

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?

JumpCrisscross3• 5 years ago

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.

Sytten• 5 years ago

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

Scoundreller2• 5 years ago

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.

notch656a4• 5 years ago

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.

sgt101• 5 years ago

Also, guns.

thathndude• 5 years ago

In that case BTC will never rise to the top.

vmception4• 5 years ago

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.

bufferoverflow2• 5 years ago

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.

vmception4• 5 years ago

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.

JumpCrisscross3• 5 years ago

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...

bobthepanda2• 5 years ago

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.

ahallock2• 5 years ago

Then why is crypto open to so many other first world countries?

antb1232• 5 years ago

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

modeless3• 5 years ago

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).

perl4ever3• 5 years ago

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.

ahallock2• 5 years ago

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.

bufferoverflow2• 5 years ago

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.

uncletammy• 5 years ago

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.

U.S. SEC rejects Valkyrie, Kryptoin Bitcoin trusts

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