The Bitwise digital asset management is still very much interested in creating a Bitcoin exchange-traded fund (ETF). On Wednesday, the firm sent a new letter to the United States Securities and Exchange Commission (SEC), responding to the earlier published 112-page rejection letter it received from the SEC back in October.
Published by the SEC on Friday, the new letter addressed the SEC’s manipulation fears. According to the SEC, one of the reasons the Bitcoin ETF could not be approved was the risk of market manipulation. The SEC specified that since this was a potent worry, the exchange must be “designed to prevent fraudulent and manipulative acts and practices.” Basically, the SEC wasn’t convinced that Bitwise had done enough to tackle this problem.
Bitwise has now suggested to the SEC that because the price of Bitcoin is set in the open market, the asset is “uniquely resistant” to the kind of market manipulation that plagues other markets. The firm further writes that:
“Bitcoin’s inherent fungibility and the market’s distributed nature allowed for effective arbitrage to take place between different trading venues, which helped insulate Bitcoin from attempts to manipulate individual markets.”
Bitwise notes that the requirement for surveillance sharing, as a way to stem the possibility of market manipulation, has also been satisfied. The ETF was filed on Bitwise’s behalf by NYSE Arca and the letter specifies that the latter has an agreement with the CME Group via the Intermarket Surveillance Group.
In addition, Bitwise argues that there is a very “robust set of rules” that already cater to fears about market manipulation. The CME CF Bitcoin Rate used in settling CME Bitcoin futures contracts, (a product already approved by the CFTC) operates with those rules. Also, the CME chairs an Oversight Committee which is in charge of the rates and considers Bitcoin prices from five of the world’s biggest exchanges including Bitstamp, Coinbase, Gemini, itBit, and Kraken. Bitwise then adds that:
“The constituent exchange criteria stipulates that the Oversight Committee makes sure that each exchange ‘has policies to ensure fair and transparent market conditions at all times and has processes in place to identify and impede illegal, unfair or manipulative trading practices’ and ‘cooperates with inquiries and investigations of regulators and the Administrator upon request and must execute data sharing agreements with CME Group.”
Bitwise says that a proper ETF would give “material protection” to Bitcoin investors in the U.S. who are already entering the market through other means and that it is “committed” to floating an ETF.
Bitwise first filed in January 2019 and has met with the SEC several times trying to allay whatever fears the Commission might have about the product. However, as optimistic as the company was, the SEC thought differently and disapproved the application. Shortly after the rejection, Bitwise responded and thanked the SEC for a detailed response, saying that it chose to see the disapproval as progress.
So far, the SEC is yet to approve any Bitcoin ETF.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
