The first regulated US exchange to list bitcoin futures contracts has asked the Securities and Exchange Commission (SEC) to reconsider its hardline approach toward Bitcoin ETFs and other cryptocurrency-based exchange-traded products (ETPs).
In a letter dated March 23, CBOE President Chris Concannon addressed concerns raised that the SEC had raised in a January letter sent to investment industry trade associations.
Though he did not directly ask the SEC to approve a Bitcoin ETF or ETP, Concannon did encourage the agency to consider these products on a “case by case basis” rather than as an asset class as a whole.
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“While cryptocurrency-related holdings do raise a number of unique issues, Cboe firmly believes that such holdings do not require significant revision to the well-established frameworks for evaluation related to valuation, liquidity, custody, arbitrage, and manipulation. Rather, each Cryptocurrency Fund and underlying cryptocurrency-related holdings should be evaluated on a case by case basis in a manner very similar to previous funds and their underlying holdings.”
Concannon then gave point-by-point answers to the SEC’s original letter, which raised five concerns about investor protection and cryptocurrency ETPs: valuation, liquidity, custody, arbitrage, and market manipulation.
Noting CBOE was the first regulated exchange to list Bitcoin futures, Concannon argued that the firm was “uniquely positioned” to comment on the issues surrounding cryptocurrency ETPs. Citing internal data, he said that the exchange operator expects that its Bitcoin futures volume will soon be comparable to that of other commodities when they began to be included in ETPs.
“Looking specifically to bitcoin, the nascent futures markets are developing quickly and, while the current bitcoin futures trading volumes on Cboe Futures Exchange and CME may not currently be sufficient to support ETPs seeking 100% long or short exposure to bitcoin,” Concannon concluded. “Cboe expects these volumes to continue to grow and in the near future reach levels comparable to those of other commodity futures products at the time that they were included in ETPs.”
As CCN has reported, CBOE has made clear that it believes cryptocurrency ETFs and ETPs represent an area of significant future growth for the finance industry and that it intends to be on the cutting edge of this burgeoning field.
For now, though, the industry is stuck in a waiting game.