BY Fintan Ng - October 24, 2018
Does SolidX ETF have a chance of being approved?
Elad Roisman, who was sworn in as a commissioner of the US Securities and Exchange Commission (SEC) on Sept 11, could tip the scales towards approving a bitcoin-based exchange traded fund (ETF).
The US securities regulator’s newest commissioner was briefed on the SolidX ETF on Oct 9, according to a SEC memorandum.
Representatives from SolidX, a blockchain-based fintech company, VanEck, a New York-based investment management firm and exchange operator Cboe were also at the meeting.
It is understood that Roisman may lean towards approving the SolidX ETF based on his stance on the role of the SEC as a regulator that was made clear earlier in the year at a US Senate banking committee hearing.
Roisman noted that the regulator “must examine and re-examine its rules, regulations, and guidelines to ensure that they are still working as intended to accomplish the SEC’s mission”.
He cited initial coin offerings (ICOs) and blockchain as among the new investments and technologies that have recently emerged that the SEC have to deal with.
“It is essential that the SEC approach these new challenges in a fair and transparent manner, provide clarity and certainty to the markets and investors, and enforce the laws and regulations that hold market participants accountable,” Roisman says.
The lack of regulation and perceived manipulation in the underlying bitcoin market have been the main factors in withholding approval for such ETFs.
But the SEC will take note of the physically settled bitcoin futures offered by the Intercontinental Exchange and trading on a regulated platform with secure as well as insured custody.
Also, Fidelity Investments, which manages US$7.2 trillion in assets, is offering custody and trading services to institutional clients who want to trade cryptos.
The commissioners will be mindful of efforts by US lawmakers recently to clarify the SEC’s stance on ICOs and cryptocurrencies as well as several legal judgements, which decided that cryptocurrencies are commodities.
While hopes that the SEC will approve a bitcoin-based ETF before year-end has been dashed, the market expects that an approval will be granted before the end of the first quarter of 2019.
Hopes are being pinned on the SolidX ETF to be approved because it involves the trading of actual bitcoins and is focused on institutional traders.
The SEC postponed a decision on the SolidX ETF twice and will only decide around early March after calling in late September for comments on the proposed rule change brought by Cboe BZX Exchange, which is seeking a listing for the securities.
Roisman’s appointment brings to two the number of commissioners who are mindful of how regulators should balance investor protection in order not to curb innovations in technology.
Hester Peirce, the other commissioner, has been notable for being the only commissioner that dissented on the rejection of the Winklevoss Bitcoin Trust, and had made known her stance publicly on how the SEC should not overstep its bounds in regulating new investment assets.