A company expects to know how to obtain approval for an exchange-traded fund (ETF) in bitcoins approved by US regulators.
Wilshire Phoenix, a relatively young financial company based in New York, has requested the launch in May of the US ETF Bitcoin & Treasury Investment Trust with NYSE Arca. At this point, a dozen Bitcoin ETF proposals had already been reviewed by the US Securities and Exchange Commission (SEC), including nine per day. But unlike other ETF applications, the Wilshire Phoenix ETF will invest in both bitcoins and US Treasury securities, commonly referred to as treasury bills.
The SEC is currently reviewing the application.
"Our proposed ETF related to bitcoin is quite different from those previously submitted to the Commission for approval," said William Herrmann, founder and managing partner of Wilshire Phoenix, during a phone interview. "To name a few distinctions, the composition of the Trust is very different. Our trust is a multi-asset trust (bitcoin and T-Bills), as opposed to just bitcoin. "
The SEC has long been hesitant to approve an ETF that is exposed to digital assets, due to the relatively young age of the market and potential risks to investors. The agency rejected a number of proposals, while other applicants have proactively withdrawn their deposits.
Herrmann said the Wilshire ETF has several mechanisms to address these concerns.
The Trust itself will rebalance automatically every month to address potential concerns about Bitcoin price volatility, Herrmann said. Essentially, if Bitcoin's price volatility increases, the index will reduce its exposure to cryptocurrency and increase its exposure to treasury bills. As the volatility of Bitcoin decreases, the opposite happens.
The weighting will be transparent, the index being posted on the Bloomberg and Thomson Reuters portals, he said.
CME's Bitcoin reference rate will provide Bitcoin price data in the Trust, rather than using an internal price calculation method "or that of a related party," he added.
Wilshire Phoenix also hopes to address the SEC's concerns about market manipulation by resorting to a sharing-oversight agreement, an item that the regulator pointed out was needed when rejecting a recent request from the SEC. 39 Bitcoin ETF. Herrmann said:
"The WEC has supervisory sharing agreements with the WEC futures market and with the relevant portion of the spot market that forms the basis of the Trust's bitcoin values. This responds to the SEC's concerns about the lack of supervisory sharing arrangements with the relevant cash market, a problem that previous applicants had not been able to address. "
More recently, the SEC has rejected the Bitwise Asset Management fund. In a massive 112-page order released Oct. 9, the regulator said that shared oversight agreements are needed and that market manipulation remains a real concern.
As recently as September, SEC chairman Jay Clayton said that although progress has been made in the sector, the issue of market manipulation has not been resolved.
For the Wilshire Phoenix proposal, the SEC began accepting comments on the proposal in June, although the final decision is in a few months. The agency is currently accepting comments on the proposal until November 12, 2019.
Herrmann is optimistic about the chances of the ETF proposal: "We have developed an ETF compatible with the protection of investors and just, orderly and efficient markets".
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