The window for accepting public comments on the VanEck/SolidX bitcoin exchange traded fund (ETF), currently being considered by the U.S. Securities and Exchange Commission (SEC), has come to a close (although there is a rebuttal period). The comments have come after the SolidX decision has been delayed multiple times, and after a rash of similar ETF applications were rejected.
Previous denials of bitcoin ETFs have centered most of all around the lack of a large enough pool of liquidity connected to one or several regulated exchanges with surveillance-sharing agreements.
In the SEC’s view, only agreements with an exchange of adequate size would “provide a necessary deterrent to manipulation because they facilitate the availability of information needed to fully investigate a manipulation if it were to occur”.
The SEC issued a series of question to the public regarding its specific points of concern, soliciting comments germane to the decision at hand.
So, how did the international public respond? I present the following categories which cover most responses, and at least one notable example of each:
The FUDer
These arguments inevitably reflect the SEC’s own historical arguments for denial: that there is not enough liquidity, and that too much of it is traded off exchange/over-the-counter (OTC).
Grady Ryther is a perfect example: “I strongly urge the SEC not to approve any Bitcoin ETF until the markets have significantly more regulatory oversight. There is rampant manipulation on most foreign crypto exchanges. Even Kraken, a US exchange, allows wash trading. Spoofing is another very common practice on these exchanges. Most also do not require any KYC/AML procedures to start trading, even for American customers (e.g. Binance).”
Bobby Mulligan went further, trotting-out the common stereotypes associated with cryptos: “In its unregulated and short existence, BTC has existed in an environment of fraud, crime, and speculation, and I do not believe there is true investor value outside of those three factors for the asset. Because of the high transaction expenses, there are no reasonable efficiencies to be had from the BTC technology, though refinement and other applications may exist”.
The buttoned-up
This is the space for respectable folks, not-retail investors who want to let their hair down a little, feel a bit risqué, and invest in bitcoin – but safely! They want need the cozy blanket of federally backed insurance and regulation, to let them know everything’s okay.
Celalettin Ulubay put down his cigar just long enough to talk real with the SEC: “I am an institutional investor and would like to invest in Bitcoin. But the current structure is not secure. That’s why I want it to be regulated. In order to be regulated, you must give your consent. I want to make my investment with ETF”.
Clyde D. Travis wants to believe: “With a market cap in the hundreds of billions, the cryptocurrency world needs regulatory oversight that only the SEC can provide. Millions of investors globally NEED the order and legitimacy that the SEC’s approval will provide to the market”
The pie-in-the-sky
Respondents here are sure that cryptoassets and bitcoin will change the world, and they want the U.S. government to get out of the revolution’s way – and regulate institutional trading.
Fan Xia of Rite-Hite Holding Company’s got this: “More importantly, crypto currency and Blockchain innovations that can transform the future of our society and its importance far outweighs the concerns the SEC had over the underlying Bitcoin market”.
And Mike Noble of California, clearly hails from a legal state: “Let the pieces as you flip the last chip roll peacefully around and round everyone watching quietly smiling inside. Pull your sword from the stone and have it glossy always in the eyes of all. Look at the eagle in your logo… be the eagle”.
The one-sentencer
Shakespeare wrote in Hamlet that “brevity is the soul of wit”. Several respondents clearly agree, and took time out of their busy days to respond. Dex Asis gets honorable mention for signature originality:
“File Number SR-CboeBZX-2018-040. We support.
Sent from Yahoo Mail on Android”.
Actually that’s three sentences. I guess?
The inevitable
Blockchain will take over the world, see all these big players already adopting it? Get out of its way! This category of responses is laced with names of bluechip companies flirting with blockchain tech, and includes self-assured phrases beginning with “cryptocurrency/blockchain/bitcoin will become…”. Respondents here may or may not have an axe to grind against financial regulatory institutions for not preventing the 2008 recession.
Conrad Powell, I think falling in this category, may need sensitivity classes, commenting that “[i]t is time for The United States to take charge of the cryptocurrency space. We should be setting the agenda for the industry. Imagine other countries that are substandard to the United States are charging ahead with innovations ahead of the United States”.
And Paul K. must live by the sea, because he’s still salty: “Approve a product that you guys weren’t smart or ethical enough to create. The financial world will evolve with or without you. Don’t be on the wrong side of history.”
The little guy
Respondents in this category often laud the SEC, recognizing the great public service they fulfil, and ask for an easy way to buy bitcoin so that they, too, may have a piece of the pie and make big gains. They would spend more and that would be good for the economy, they argue.
Hugh Garteiser says it all: “Please consider for a moment not the ‘Accredited Investor’ but the hard working pay check to pay check American, who would also like to see a profit made on small crypto currency investments. Turning $100 into a possible $1000.”
The actually cogent
Some respondents presented cogently written complex thoughts (!), often in error-free grammar (!), sometimes in PDF form (!) downloadable from the SEC’s website. I wonder if they regulate for viruses.
Victor Marquez, Esquire, calls out the SEC for already having approved several eyebrow-raising (respondent’s term) products, writing that “I could go on, but the point is that the SEC has already opened the floodgates to an ETF marketplace that probably does NOT raise investor confidence that ETF approvals are designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. Rather, it seems as though the SEC has construed the relevant portions of the SEA to develop over time a ‘Wild West’ ETF marketplace”.
Ryan Sagul, CEO of Lavaliere Capital Management, was perhaps most erudite and eloquent in his reasoning against approval – speaking the SEC’s own financial-legalese – for example remarking on point fourteen (one of the pivotal points on the subject of adequate market size and surveilling): “There is little need for a manipulator to participate on Gemini to influence the exchange price when, by the Sponsor’s estimation methodology, greater than 99% of all market volume exists elsewhere”.
Chris Newman chastised: “You denied past approvals, in part, because of the lack of liquidity yet by rejecting an ETF you are blocking the mechanism that would allow a massive influx of liquidity. Hester Peirce succinctly captures my point of view on your repeated delays in allowing a Bitcoin ETF.”
Special mention
Maxwell Gomersall flexed his ZeroHedge credentials, pleading that “the decision is vital for the US economy as a stock market crash is due”.
“Laosy Guesses” is notable for taking no position whatsoever, expressing to the SEC how his year probably went: “REKT”. I feel you.
Satoshi Nakamoto, Affiliation: Professor of memenomics, came out of hiding to tell the SEC that “Ripple is scam [sic]”. Is that British English?
Nelson Aquino issued a general cry for help: “Please approve this for us. Most cryptocurrency holders are young people just trying to find a way in this confusing enough world. Throw us a bone please and let us have this one”.