Bitwise files Bitcoin ETF application in the face of continued SEC scepticism

Bitwise steps up to the plate with its own crypto Exchange-Trade Fund proposal.

Cryptoasset Index and fund Bitwise Asset Management today announced that it has filed an initial registration statement with the U.S. Securities and Exchange Commission (SEC) proposing a new physically held bitcoin Exchange-Traded Fund (ETF).

The proposed Bitwise Bitcoin ETF would track the company’s allied Bitwise Bitcoin Total Return Index, which tracks what the company calls the “the full value of an investment in bitcoin, inclusive of meaningful hard forks.”

In the face of 12 months that have consistently seen applications for such products rejected by the U.S. regulator, Bitwise’s press release states its belief that its “proposed ETF differs from previously filed proposed bitcoin ETFs in that it will rely on regulated third party custodians to hold its physical bitcoin, and in that the index draws prices from a large number of cryptocurrency exchanges, representing the majority of currently verifiable bitcoin trading.”

The ETF, if approved, is set to be available through the NYSE Arca., Inc. (NYSE) exchange, which will file an application in the coming days to list shares in the new product under a yet-to-be-determined ticker symbol.

Despite 2018 marking a year of setbacks for such products, including the proposals from New York-regulated exchange, Gemini, John Hyland – the global head of Exchange-Traded Funds for Bitwise – say the company is “optimistic that 2019 should be the year that a bitcoin ETF launches,”

We have reported on the main objections from the SEC to such proposals, which centre around fears of price manipulation on the exchanges that would be used to track investments like the ETFs proposed by multiple companies in 2018, of which only one has yet to be rejected.

However, Matt Hougan – Bitwise’s global head of research, who oversees Bitwise’s indexing efforts – believes “the SEC has asked thoughtful and relevant questions about the quality of the crypto trading ecosystem, the reliability of crypto pricing, the strength of the arbitrage function in crypto and the robustness of crypto custody,” but that his team has  “spent the past year researching these questions and look forward to discussing those findings with the SEC staff in connection with the filing and listing application.”

The Bitwise organisation  Bitwise Investment Advisers, LLC, have been operating private crypto-based funds for the last year or so, having launched the Bitwise 10 Private Index Fund in 2017. It now runs five similar funds for institutional and high-net worth investors, which it says has allowed it to address issues raised by the SEC regarding custody, trading, pricing, liquidity, and reporting.

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