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The two bodies most concerned with Bitcoin at a federal level are the US Securities and Exchange Commission (SEC), an independent agency of the federal government which enforces federal securities laws and regulates securities markets, and the Commodity Futures Trading Commission (CTFC), which regulates the US derivatives markets—including futures, swaps, and some options.
Crucially, the SEC has stated that Bitcoin is not a security. Meanwhile, the CTFC declared, in 2015, that it is a commodity, like gold, and thus subject to its regulations.
Largely because of the fragmented legal system in the US, the situation regarding Bitcoin is patchy; there are myriad laws, and they vary from state to state.
Hawaii, for instance, banned all crypto operations in 2014 but relented in 2018, and now requires anyone involved in operations related to Bitcoin and cryptocurrencies to apply for a money transmitter license.
New York, Delaware, Florida, and Kansas have also adopted regulations, but the majority of states haven’t legislated on cryptocurrency.
Wyoming stands out. “The Blockchain State” has passed over a dozen laws facilitating easier commerce for cryptocurrency businesses and broader acceptance of crypto—including granting digital currencies the same legal status as money and authorizing banks to hold digital assets in custody.
Although it’s not due any time soon, California’s “Digital Asset Regulatory Bill” is designed to provide the state with similar regulatory clarity, and (it hopes) position it as a potential hot spot for crypto businesses. It was overwhelmingly passed by the State’s Senate Committee in August and is now subject to a report.
For some reason even the bitcoin or crypto currency is legal in America there still some point that wasn't approve and keep being block like such the ETF that for bitcoin or the Bitcoin ETF which is proposed to the SEC of US.
An ETF, or exchange traded fund, is an investment vehicle that tracks the value of its underlying asset
The first ETF launched in 1993, and they became popular as a way for retail investors to invest in a basket of assets at once. If you wanted to invest in 500 of the largest companies in America at once, you could buy shares in a S&P 500 ETF.
A Bitcoin ETF is simply a normal ETF with Bitcoin as the underlying asset being tracked—so strictly speaking, no one invented the concept.
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However, the first application for a Bitcoin ETF was filed with the Securities and Exchange Commission (SEC) by the Winklevoss Bitcoin Trust in 2013 and the US Patent and Trademark Office awarded the Winklevoss’s a patent for “exchange-traded products.”
A Bitcoin ETF would be managed by a firm that buys and holds the actual Bitcoin; the price would be backed by the Bitcoin held in the fund. The firm would list this ETF on a traditional stock exchange, for instance the New York Stock Exchange. You could trade this ETF just as you would any other stock.
A couple of things to note: First, some ETFs, like an S&P 500, represent equity shares, so you’d get a cut of the dividend that, say, Tesla pays its shareholders, as well as any dividends paid out by the other 499 firms. Bitcoin’s decentralized, so that wouldn’t happen.
Second, just like other ETFs, you’d also have to pay fees to the company that handles the Bitcoin ETF. This would go to its operators, but some of it would also pay the custody and management fees for the purchase and storage of the Bitcoin that underlies the ETF.
There are a few reasons why ETFs are preferable to buying Bitcoin directly.
Holding Bitcoin places the burden of security squarely on you. This means that you would be responsible for keeping your own private key safe. This may comprise buying a hardware wallet to protect purchased Bitcoin or storing private keys in a secure manner.
Buying Bitcoin yourself also exposes you to the risk of exchanges, many of which have been hacked at least once. You’d also have to work out how to file taxes for each purchase and sale of Bitcoin. And if you don’t know how to do all of these things, you’d have to research the crypto rabbit hole to work everything out. ETFs solve these problems by offloading the responsibility of security and storage to someone else.
Bitcoin ETFs would also offer new types of trading opportunities. One is “short-selling.” This is, in effect, a bet against Bitcoin. It works by borrowing the ETF and selling at the current market price. The position is then closed by re-buying the ETF at a (hopefully) lower price.
Since ETFs are generally understood by traditional investors, but cryptocurrencies are not, many crypto advocates believe that a Bitcoin ETF could bring more money into the crypto market. It creates a safe bridge for mainstream and institutional investors to make bets on the price of Bitcoin.
If it’s far easier to invest in a Bitcoin ETF, the argument goes, more people are likely to do it; Bitcoin is one of the best performing assets of the decade, and its volatility and potential risk make it attractive for high-risk investors.
A Bitcoin ETF is expected to bring a new level of mainstream trustworthiness and acceptance. Bitcoin ETF proposals continue to be proposed and pushed to the SEC despite being rejected over the last several years because one approval could open up a floodgate of new investments into the crypto space.
Essentially, an approval by the SEC means that institutional investors would be able to trade and invest in the price of bitcoin. That also means that Bitcoin joins the rest of the securities market and can be easily exchanged for Tesla stock, US bonds, gold, oil or any other traditional asset.
So according to above information about Bitcoin ETF we already know that having it is like having a holy grail for institutional investors' acceptance for our beloved bitcoin.
US Securities and Exchange Commission (SEC) has repeatedly blocked proposals for a Bitcoin ETF, and the prospects of the investment vehicle launching in the US have become increasingly distant.
An ETF is a little like listing Bitcoin’s price on the stock market. ETFs track the price of an asset (or several at a time)—in this case Bitcoin. To investors, a Bitcoin ETF would be an investment vehicle that offers exposure to Bitcoin without actually holding Bitcoin itself.
This means they don’t have to concern themselves with issues of custody—for the high rollers, paying someone to secure your Bitcoin can get pricey—and they can play around with the usual tools of the stock market, such as short selling.
But the SEC has blocked several proposals for a Bitcoin ETF. At least nine entities have applied so far, with no success. Cameron and Tyler Winklevoss, founders of the Gemini crypto empire, tried to launch a Bitcoin ETF in 2017, but the SEC shot it down.
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At the time, it argued that ETF exchanges wouldn’t have enough oversight on Bitcoin, since much of Bitcoin is traded on unregulated exchanges and the price is prone to manipulation.
Others have swung and missed. The investment firm VanECK worked with blockchain startup SolidX to publicly list a Bitcoin Trust, but withdrew their applications several times last year after backlash from the SEC. And the SEC snuffed Bitwise Asset Management’s attempt for a Bitcoin ETF last year, even though it argued that its ETF derived its price from cryptocurrency exchanges that had not faked transaction volume.
The SEC said that this wasn’t effective enough to “insulate” the ETF from “attempts at manipulation in a way beyond that of existing derivative securities products that trade on highly regulated markets.”
While Bitcoin ETFs may sound attractive, few exist worldwide, and there aren’t any Bitcoin ETFs in the US.
Since 2017, the US Securities and Exchange Commission (SEC) has repeatedly rejected proposals for Bitcoin ETFs. The major issue, according to SEC Chairman Jay Clayton, is that Bitcoin’s price is prone to manipulation. And even if a Bitcoin ETF only drew prices from the most scrupulous cryptocurrency exchanges, Bitcoin’s price could be manipulated on less reputable exchanges with looser restrictions.
SEC Chairman Jay Clayton reiterated this a year later at Coindesk’s conference: “The prices retail investors are seeing are the prices they should rely on, and free from manipulation—not free from volatility, but free from manipulation.”
SEC approval would be a major victory for Bitcoin towards being seen as a legitimate investment.
Through its denials, the SEC has outlined two ways to establish a Bitcoin ETF that satisfies Exchange Act 6(b)(5), Bob Morris, Chief Compliance Officer at Apifiny, told Decrypt.
An applicant must prove one of two things. First, that Bitcoin is “inherently resistant to fraud and manipulation, or that other means to prevent fraudulent and manipulative acts and practices will be sufficient”. Second, that any exchange listing the Bitcoin ETF has entered into a surveillance agreement with a “regulated market of significant size” because “such agreements provide a necessary deterrent to manipulation because they facilitate the availability of information needed to fully investigate manipulation if it were to occur.”
Given that fulfilling the first criterion is very difficult, the second option could be a way forward, said Arad. This notion of shared-surveillance refers to “frameworks existing in other markets that allow monitoring for risks across multiple markets at the same time.”
This, coincidentally, is what Solidus Labs has built: a “crypto-native cross-market manipulation solution in some markets outside the US which can be deployed either by regulators or by consortiums set by the exchanges themselves.” It’s currently working with exchanges to set up a framework.
Morris said that the SEC and FINRA helped guide this framework through a recent No-Action Letter, which outlined how broker-dealers such as a Coinbase can facilitate crypto transactions without incurring the wrath of the SEC. The way to do this, said Morris, was to provide surveillance procedures.
Arad notes that the securities industry also faced this issue. There, the Intermarket Surveillance Group, a shared-surveillance consortium, let US exchanges trade derivatives of securities native to foreign markets, he said. And the online loans industry succeeded in the late 2000s when “ID Analytics partnered with lending platforms to create the Online Lending Network, a loan application data repository that detects attempts to stack loans,” he said.
“It’s important to keep in mind that the ETF is just one example—this challenge of cross-market manipulability is a barrier for market integrity and regulated crypto trading as a whole, and therefore to the growth of the industry as a whole.”
Megan Monroe-Coleman, who heads compliance at San Francisco-based crypto exchange OKCoin, told Decrypt that regulators’ general crackdown on crypto projects “help[s] increase the credibility of cryptocurrency in the market.” This, she said, makes the industry less attractive for “bad actors,” and paves the way for ”a measured but deliberate shift in the reputation of the crypto industry as a whole."