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U.S. SEC rejects Valkyrie, Kryptoin Bitcoin trusts

erentz 5y 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.
- Scoundreller 5y ago
  Plenty of options if you can access Canadian markets. Generally I would not recommend due to high fees and probably ??? tax situation.
  - antb123 5y 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.
- vmception 5y ago
  its happenstance https://news.ycombinator.com/item?id=29666409#29667640 https://news.ycombinator.com/item?id=29666409#29667640
- hatesinterviews 5y 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.
  - modeless 5y ago
    We don't have to speculate. The SEC has stated their reasons. They are concerned mainly about market manipulation, not custodianship.
    - hatesinterviews 5y ago
      I think you’re overlooking the part of their statements where they have repeatedly emphasized investor protections. Some of the different ETFs are filed under different legislations, and the SEC claim that the Investment Company Act of 1940 provided better investor protections than the Securities Act of 1933, but I’m unclear of what particular stipulations make that so.
    - thedudeabides5 5y ago
      Sorry what are the reasons?
- landemva 5y 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.
  - javert 5y 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 5y ago
  It's because (in the SEC's view) crypto spot markets are highly manipulated but futures markets aren't.
  - darawk 5y 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.
    - naveen99 5y ago
      Cme btc futures can be spot settled if you can find a willing counterparty for an otc block trade.
  - modeless 5y 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?
    - deleted 5y ago
      [deleted]
    - deleted 5y ago
      [deleted]
  - JumpCrisscross 5y 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 5y 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 https://www.youtube.com/watch?v=F_kZELcynKQ
- Scoundreller 5y 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.
  - notch656a 5y 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.
    - ls612 5y ago
      This is a silly argument considering the widespread adoption of the USD for international trade, well beyond the oil industry.
      - notch656a 5y ago
        You're right, if I held all Euros which are used in something like 33% of worldwide forex trades, then everything would be dandy and the government wouldn't mind at all that I wasn't paying in dollars. That's why every American has lots of Euros. The dollar isn't better managed than all the other currencies. It's a network effect of debt denominated in USD, one of the most relevant of which is that taxes for about 25% of global GDP is paid in dollars.
bufferoverflow 5y 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.
- vmception 5y 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.
  - JumpCrisscross 5y 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-1884.pdf https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-188...
    - vmception 5y ago
      The exceptions are the rule But less vague, “approval” doesnt mean judgement was pased and gatekept, approval means that disclosures are made and investors can make their own decisions with that level of disclosure. And then there are exceptions to that where the SEC gatekeeps and likes that power
- bobthepanda 5y ago
deleted 5y ago
[deleted]
uncletammy 5y 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.

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.

Scoundreller 5y ago
Plenty of options if you can access Canadian markets. Generally I would not recommend due to high fees and probably ??? tax situation.
- antb123 5y 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.
vmception 5y ago
its happenstance https://news.ycombinator.com/item?id=29666409#29667640 https://news.ycombinator.com/item?id=29666409#29667640
hatesinterviews 5y 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.
- modeless 5y ago
  We don't have to speculate. The SEC has stated their reasons. They are concerned mainly about market manipulation, not custodianship.
  - hatesinterviews 5y ago
    I think you’re overlooking the part of their statements where they have repeatedly emphasized investor protections. Some of the different ETFs are filed under different legislations, and the SEC claim that the Investment Company Act of 1940 provided better investor protections than the Securities Act of 1933, but I’m unclear of what particular stipulations make that so.
  - thedudeabides5 5y ago
    Sorry what are the reasons?
landemva 5y 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.
- javert 5y 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 5y ago
It's because (in the SEC's view) crypto spot markets are highly manipulated but futures markets aren't.
- darawk 5y 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.
  - naveen99 5y ago
    Cme btc futures can be spot settled if you can find a willing counterparty for an otc block trade.
- modeless 5y 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?
  - deleted 5y ago
    [deleted]
  - deleted 5y ago
    [deleted]
- JumpCrisscross 5y 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 5y 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 https://www.youtube.com/watch?v=F_kZELcynKQ

Scoundreller 5y 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.
- notch656a 5y 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.
  - ls612 5y ago
    This is a silly argument considering the widespread adoption of the USD for international trade, well beyond the oil industry.
    - notch656a 5y ago
      You're right, if I held all Euros which are used in something like 33% of worldwide forex trades, then everything would be dandy and the government wouldn't mind at all that I wasn't paying in dollars. That's why every American has lots of Euros. The dollar isn't better managed than all the other currencies. It's a network effect of debt denominated in USD, one of the most relevant of which is that taxes for about 25% of global GDP is paid in dollars.

bufferoverflow 5y 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.

vmception 5y 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.
- JumpCrisscross 5y 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-1884.pdf https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-188...
  - vmception 5y ago
    The exceptions are the rule But less vague, “approval” doesnt mean judgement was pased and gatekept, approval means that disclosures are made and investors can make their own decisions with that level of disclosure. And then there are exceptions to that where the SEC gatekeeps and likes that power
bobthepanda 5y ago

deleted 5y ago

[deleted]

uncletammy 5y 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.