SEC Faces Biggest Test on Thursday As ProShares Bitcoin ETF Deadline Nears

SEC Faces Biggest Test on Thursday As ProShares Bitcoin ETF Deadline Nears

The Securities and Exchange Commission (SEC) has not taken any favorable stand in respect of bitcoin exchange-traded fund (ETF) in the previous meetings. Until now, the regulator has refused permission for one while postponing a few others to September 30. On August 23, the regulator will have to take a call on the ProShares Bitcoin ETF. This time it is going to be either “yes” or “no” to the proposal as there is no scope for delaying its decision further like the last month’s proposal.

Regulator’s Rules

On Thursday, the regulatory officials will be compelled to take a decision on two products, i.e., ProShares Short bitcoin ETF and ProShares bitcoin ETF. In this case, there is no scope to delay its decision like what it did in the case of Cboe’s VanEck/SolidX bitcoin ETF. That is because the proposals were submitted initially to the SEC in December last year. The ProShares ETF will strengthen future bitcoin contracts and not any physical holdings of the cryptocurrency itself.

In a nutshell, the value of the ETFs would be based on the bitcoin futures contracts traded on the two futures exchange, i.e., CME or the Cboe. This was based on the original filing by the concerned, reported. In September 2017, the company has proposed its futures-based ETFs while indicating that the futures market for the digital coin was in the initial stage only. Therefore, the company indicated that there was no guarantee that an active market will develop for bitcoin futures.

Earlier, on December 19 last year, the ProShares Trust has made a necessary filing with the SEC seeking to withdraw a planned change of rule. This was in respect of ProShares Bitcoin, as well as, Short bitcoin ETFs apart from the ProShares bitcoin futures/equity strategy ETF. This apart, the company sought a change of rule for the ProShares Bitcoin/Blockchain Strategy ETF. The company was compelled to withdraw or make changes following the regulator’s move to push back its decision.

There is a number of ETF proposals waiting with the SEC for its approval. However, the regulator is more concerned about the volatility of bitcoin price at that point in time. This was not the first time since Direxion Shares, First Trust Advisors, and VanEck has also withdrawn more or like similar proposals. The SEC is concerned more about the unregulated structure in most part of the world on cryptocurrencies.

Considering Proposals

However, the regulator announced towards January end that it was considering all the proposals of futures of bitcoin. Until now, the regulator has not given any permission to launch either bitcoin ETF or with any other digital currencies ETF. That would mean that either the proposals got reject or postponed. For instance, Gemini founders’ and Cameron and Tyler Winklevoss proposal were rejected last month.

Incidentally, the proposal got rejected in the spring season of 2017 itself. However, Bats BZX Exchange has favored an appeal, which was heard by the regulator’s commissioners later, since it filed the proposal. The cryptocurrency market is keen to know a decision of the SEC since it would play a key role in shaping up the upcoming market.

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