Opinions

Chance for Bitcoin (BTC) ETF in 2020, If Not in 2019?

Reports are that there are currently no applications pending for the bitcoin exchange traded fund (ETF) from the U.S. Securities and Exchange Commission (SEC) for the very first time in over a year, does that mean Bitcoin ETF in 2019 is no more a possibility?

Last year in June, an investment management firm, VanEck filed an application for the bitcoin exchange traded fund (ETF) and the decision for the proposal was due on 27th of February this year but the money making company withdrew the application due to an acclaimed government halt.
The CEO of VanEck, Jan van Eck believes that it is better to let the shutdown pass and then consider to “re-file and re-engage in the discussions” with the U.S. Securities and Exchange Commission (SEC). The rationale behind VanEck’s application withdrawal from Bitcoin ETF was that it was most certainly going to be rejected by the government authority considering the current scenario in the US financial market, hence the company thought it was better to wait instead of getting rejected.

Due to such distress in the financial market in US, other organizations are also reconsidering their intentions to file for an application for Bitcoin ETF at the moment. The approval for Bitcoin ETF will surely interest many investors as it will ratify bitcoin’s value in the world of trade once again and it seems to be utterly important for the cryptocurrency in order to survive in the market seeing the continuous price crashes from more than a year now.

Recently, around nine different proposals for change in rules for exchange traded funds (ETFs) filed by ProShares, Direxion and GraniteShares were rejected by the SEC as there were rising concerns for manipulation in the crypto market. However, the government authority considered reviewing the rejections almost immediately.

The U.S. Securities and Exchange Commission (SEC) must make a decision on whether to accept or reject an application on a particular deadline date but the review on the decision is not subjective to any deadline date, according to Jake Chervinsky, who is a professional lawyer. Moreover, the process of reviewing a decision previously took about six to sixteen months’ time and when the government authority is not operational, the reviews are suspended. So, while there is a government halt in the US, the decision for the nine proposals suggested by ProShares, Direxion and GraniteShares is currently at pause and as soon as it reopens, the review decision could be made but the amount of time it may take is still not defined.

Mr. Chervinsky is optimistic that a bitcoin ETF could still be approved before the end of this year depending upon:

(1) when the ETF proposal is filed and (2) the state of the bitcoin markets when the SEC makes its decision.

There is a possibility that we may see a bitcoin ETF getting approved by the government authority but there are two conditions that apply to this possibility; one is the timeline of the submission of the application and the other is the market position of bitcoin when the decision is pending, both must work in favor of the applicant otherwise the chances of an approval are minimum.

An approximate time of 8 months is taken by the SEC in order to make a decision on an application, though an extension could be taken by the government authority to examine the application much thoroughly. This means that if a bitcoin ETF is to be approved within this year, then an application must be submitted before the 31st of May, Mr. Chervinsky believes. He also said:

The question will then be whether the bitcoin markets mature enough before the SEC makes its decision to adequately address all the issues that have killed ETF proposals in the past, such as valuation, liquidity, custody, and market manipulation.

The law expert thinks that all previous issues that caused rejections must be taken into notice by the applicants and should be worked on properly to avoid further rejections, raising a point on the crypto market’s maturity. Further adding:

In my view, it’s entirely possible that another [10] months of development in the cryptocurrency ecosystem could be enough to finally warrant approval of a bitcoin ETF.

According to Jake Chervinsky, the time left in this year could be all that is needed for any applicant to receive an acceptance for a bitcoin ETF. If it’s not, then hopes for a bitcoin ETF in 2019 must be written off and work must be done to reach the milestone in 2020.

Jaudat Sulehri

A management student, sports enthusiast and a writer. Jaudat gives his insights on the cryptocurrency in the world of trade and blockchain technology in particular. He also holds investments in XRP and BCH. Contact the editor at editor.opinions@blockpublisher.com

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