New York-based players in the crypto space are taking a long and patient approach to what they hope will be the first fully regulated Bitcoin ETF as well as fully compliant new infrastructure to expand cryptocurrency’s reach into Wall Street’s portfolios.
In a new episode of the podcast Unchained, host Laura Shin interviews Tyler and Cameron Winklevoss, founders of New York-based crypto exchange Gemini. With two rejected Bitcoin ETF proposals under their belts and a very long crypto bear market, they explain how they’ve managed to maintain their determination. Their plan: sway the US Securities and Exchange Commission to sign off on the first fully-regulated Bitcoin ETF proposal.
To make it happen, Gemini says it’s addressing the SEC’s concerns about market manipulation, a key factor in the Commission’s multiple dismissals of a Bitcoin ETF. Gemini says it’s fine-tuning market surveillance on the platform by using Nasdaq’s SMARTS Trade Surveillance, a suite of technologies that combine traditional alerts-based monitoring and risk-based discovery.
The system automates the detection, investigation and analysis of potential abusive or irregular trading. It uses machine learning algorithms to track “deep information on an individual’s behaviors” in the context of market conditions.
Ultimate confidence in the trading platform, they believe, can be driven through enhanced security, and they plan to deliver it. They say they have no issue with trying to honor the Commission’s slow and methodical approach to getting it right.
“I think that investors deserve the same protections that they get if they buy a share of Tesla or Apple, and I don’t think it’s unreasonable for regulators to strive for that, and especially since, as Cameron mentioned, this would be the first of many. It’s much more than just one product. It opens a big frontier, and it’s got to be opened correctly.”
As Gemini optimizes its system to satisfy regulators, roughly 94% of the SEC’s employees have been furloughed during the government shutdown, which means an upcoming ruling on the VanEck/SolidX Bitcoin ETF will likely be pushed past its February 27th deadline.
Likewise, the only other company with a crypto ETF currently in review, Bitwise Asset Management, claims that their filing has also been “complicated” by the shutdown.
In a newsletter published on Monday, Bitwise, a new entrant in the Bitcoin ETF ring, says that while some investors may be getting impatient because of continued delays regarding crypto ETFs, they shouldn’t view the SEC as anti-crypto.
“The questions the SEC has asked publicly around custody, pricing, arbitrage and market manipulation in the crypto markets are the right issues to be discussing.”
Like Gemini, Bitwise remains resolute that a Bitcoin ETF will eventually get approved.
“We’re optimistic that progress in regulated crypto custody, the massive improvement in and expansion of the crypto market making community, and new data insights will help make approving a product more feasible.”
Aside from an approval, Bitwise says the demand for a Bitcoin ETF remains strong.
According to a survey published by the firm, 58% of financial advisors say they would prefer to invest in crypto through an ETF.
Although there’s no way to know just how popular a Bitcoin ETF would become, Bitwise believes it would have distinct advantages.
“A Bitcoin ETF would have advantages over many ETFs because it would be completely unique, but, as something new and polarizing, it will face challenges as well.”
Bitwise illustrates the challenges with comparisons to the launch of GLD, the first US-traded gold ETF and the first US-listed ETF backed by a physical asset, in November 2004.
“Prior to the launch of GLD, there were plenty of ways for investors to buy gold. They could buy it directly from dealers, they could buy futures, or they could buy gold mining stocks. In many ways, it was exactly equivalent to today’s situation with bitcoin, where investors can buy directly on exchanges, can buy futures or can invest indirectly via blockchain equity ETFs.
It’s hard to imagine now, but at the time, many questioned why we needed a gold ETF too. In fact, the primary developers of GLD (the World Gold Council) were so worried about early interest in GLD that they reportedly paid UBS $4 million to support initial sales.
They needn’t have bothered: GLD brought in a record $1 billion in assets in its first three days of trading alone, eventually rising above $100 billion in AUM at its peak.”
While Bitwise says that GLD’s skyrocketing adoption was unique and that most new ETFs go much slower, the start of 2019 is marking not only perseverance but increased preparation for a major shift in the crypto markets.
Bakkt, the upcoming crypto exchange from parent company Intercontinental Exchange, is gearing up for its breakthrough launch by establishing a robust team of highly technical professionals. The company just posted eight new job listings in the run-up to its opening in 2019.
We're hiring a Director of Security Engineering
— Bakkt (@Bakkt) January 22, 2019
- Director of blockchain engineering (Atlanta, New York)
- Blockchain developer (Atlanta, New York, San Francisco, London, Tel Aviv, Singapore)
- Director of security engineering (Atlanta)
- Senior full stack engineer (Atlanta)
- Mobile developer (Atlanta)
- Software development engineer in test (Atlanta)
- Director of finance (Atlanta, New York)
- Institutional sales (New York, Hong Kong, Singapore, Tokyo)
Like Gemini, Bakkt is weathering multiple delays. Initially scheduled to launch at the end of last year, the new launch date was rescheduled for January 24th. But that date has been affected by the government shutdown as well, as Bakkt and its proposed Bitcoin custody service seek regulatory approval from a government agency – the Commodity Futures Trading Commission.