Despite the disappointing verdict for the proposal of the Winklevoss Twins’ Bitcoin-centric ETF, crypto experts still hope that regulators will begin to change their outlook on this emerging industry.
BitWise Enters Crypto ETF Race With A Crypto Index Proposal
Last week, Bitwise, a San Francisco-based asset management firm, filed a proposition to the SEC, looking to launch a cryptocurrency index ETF. If approved by the heavy-handed regulatory body, investors would be able to invest in a basket of ten cryptocurrencies, which are a part of the firm’s fittingly named “Hold 10” index.
While this may sound irrelevant for retail investors with funds already allocated to the digital asset space, this marks the first-ever attempt at a crypto index ETF. As the host of CNBC Fast Money puts it, “Bitwise is planning to go where no man has gone before.”
— CNBC's Fast Money (@CNBCFastMoney) July 30, 2018
On Monday afternoon, Hunter Horsely, the CEO and co-founder of Bitwise, sat down and took some time to explain his firm’s ETF to the Fast Money panel.
The panel, which mostly consisted of investors and analysts from legacy markets, immediately questioned Horsely why his fund would get through the SEC’s regulatory radar. Seeming rather prepared for such a question, the CEO quickly explained what makes his fund stand out against the competition. He noted:
“We introduced a private index fund last year that we’ve been operating since then. In our experience operating the (investment) vehicle — dealing with the questions around custody, dealing with all the trading partners, striking the NAV (Net Asset Value) daily, audits, tax, hard forks, airdrops (etc.) — we feel that it is possible to effectively operate an index vehicle.”
Taking a quick gander at Bitwise’s website, it becomes apparent that the firm’s private funds have already proved to have been a success, with the firm being backed by prominent VC firms like Blockchain Capital, Khosla Ventures, and Craft Ventures. Horsely later added that many of his firm’s clients “like the index strategy,” as they hold investment policies that don’t tie them down to a single asset, or in this case, a single cryptocurrency. Bringing attention to the fact that the industry is far from a single-sided coin, he stated:
“They (investors) think that something promising could come out of public blockchains. A cryptocurrency may emerge that may be really valuable and an index is a way of capturing that. I think that a lot of the focal point around public registered products, like ETFs, has been on Bitcoin because there’s a narrative that Bitcoin is the digital gold.”
Hunter Horsely: The SEC Has Demonstrated A Great Understanding Of Crypto
As regulation is a key aspect of any budding industry, the show’s host went on to query the CEO on his views on the SEC’s relationship with the crypto space. To the surprise of some, the Bitwise executive stated that he has seen the U.S. regulatory body show a growing understanding of the industry, or “open-mindedness” as he puts it. Bringing attention to the other side of the coin, he pointed out that the SEC’s aversion to approving crypto-related funds may just be a part of their job, which is protecting consumers from high-levels of financial risk.
Brian Kelly, who holds experience as a member of the industry himself, brought up the question of the potential concerns regulatory bodies may have about the index approach. Horsely responded, stating:
“The issues around an ETF, (namely) custody, liquidity, and market manipulation, are similar for most of the large cap assets. So once you get comfortable with what it takes to do that effectively in crypto, our feeling is that you can do that for many different coins.”
While Bitwise’s new proposal may not be all and end all in the eyes of regulators, a collection of a range of crypto assets may push regulators over the metaphorical edge into accepting a crypto ETF.
With this new and improved take on a crypto-backed ETF, it has become apparent that the dust has not settled yet in the rush towards the SEC’s green-light of approval.
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