The repeated refusals by the SEC for a bitcoin-based ETF is no deterrent to aspiring firms hopeful of launching the long-awaited cryptocurrency product.
Leading cryptocurrency exchange operator Coinbase has emerged as the latest contender in the race to launch a cryptocurrency ETF, and is considering an opportunity to partner with one of the largest asset managers of the world, BlackRock,
Citing people familiar with the matter, it was reported that the proposed cryptocurrency ETF is another attempt for diversification by Coinbase in its products and offerings, as the exchange continues to add new flavors to its already diversified business which currently spans across asset management, venture capital, trading, custody and brokerage.
The cryptocurrency exchange has had discussions with BlackRock's blockchain working group and expects to benefit from the latter’s expertise in launching exchange-traded products. Started in 2015, BlackRock's blockchain working group was set up “to identify applications of blockchain-related technologies in financial services.”
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The SEC, wary of bringing crypto to the masses, postponed a decision last week from VanEck and SolidX and rejected a proposal from the Winklevoss twins.
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The SEC called into question the ability of the cryptocurrency’s exchanges to sufficiently police trading.
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Part of the problem stems from how slow regulators have been to define their views of virtual currencies.
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While there have been rumors about BlackRock’s varying interest in cryptocurrencies, it has not made any concrete progress. In July, its chief multi-asset strategist Isabelle Mateos y Lago said that though the company is watching cryptocurrency, it does not view it as an investable asset, while earlier in March, the company’s global chief investment strategist Richard Turnill said that “cryptocurrency investing is only for those who can bear 100% losses.”
It’s been month after month of record-breaking, confounding growth for the cryptocurrency, accompanied by regular warnings from banks about bubble speculation.
An increasing number of institutional investment firms like Goldman Sachs, Citigroup, Fidelity, JP Morgan and NYSE-parent ICE have announced plans to launch a variety of services around cryptocurrency trading. They range from offering custodian solutions to digital asset-based cryptocurrency holdings to cryptocurrency trading platforms. An ETF seems to be the natural asset to be added to the list in the evolving cryptocurrency ecosystem. However, the SEC has kept all bitcoin ETF proponents in the waiting. It has been regularly rejecting the numerous applications for bitcoin ETF citing possibilities of fraud and need for investor protection.
With the initiative, Coinbase joins the league of multiple other cryptocurrency firms, like the Winklevoss twins-led Gemini exchange, Bitwise Asset Management and VanEck, who are awaiting the SEC nod for their respective ETF.
Earlier in March, Coinbase announced plans for an index fund based on cryptocurrencies, and the product named Coinbase Index Fund was launched in June. While the index fund is aimed at accredited investors and allows investments in the range of $250,000 to $20 million, the proposed ETF is geared toward the mainstream retail investors who may be allowed investments in lower amounts.
If the ETF materializes, it will possibly be based on a basket of cryptocurrencies instead of being the one based on a single virtual currency.
