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Pantera CEO: Investors Overreacting to SEC Delay on ETF

Crypto hedge fund Pantera Capital’s CEO Dan Morehead has said that investors have been pushed into a state of panic by the SEC’s delayed decision on Bitcoin exchange-traded funds (ETFs).

Morehead said on Wednesday’s CNBC “Fast Money” that ETF wasn’t imminent, a view shared a week prior on the same show by Brian Kelly, who saw next year as the most likely date for approval rather than September. He commented:

“The main thing to remember is that Bitcoin is a very early-stage venture, but has real-time price feed — and that’s a unique thing. People get excited about the price and overreact… I still think it will be quite a long time until an ETF is approved. The last asset class to be approved for ETF certification was copper, and copper has been on earth for 10,000 years.”

The SEC has delayed another decision on approval of a Bitcoin ETF after several attempts by investors over the years to push one through. On the announcement of a delayed decision, Bitcoin lost further ground last week.

Morehead suggests that the new Bakkt project should be enough to hearten investors rather than to sell Bitcoin on the basis of a delayed decision. He explained:

“The ETF rejection is the same story we’ve had for five years. The SEC has been very cautious with an ETF… That’s huge news. That is going to be a very profound impact over the next five or 10 years for the markets, and, to my mind, that’s what people should be focused on.”

CNBC’s Fast Money regular Brian Kelly was the first to predict that an ETF was unlikely to happen this year, and is in total agreement with Morehead, arguing that a sell Bitcoin position is not the right one to be taking. He explained:

“It [Bitcoin] has had a tremendous run off of USD 5,800, and that was all really because people thought there was going to be a bitcoin ETF. The SEC came out and postponed that decision. A little spoiler alert, on September 30, SEC will likely postpone it again, because the market is not ready for it and the SEC hasn’t had the answers to their questions yet.”

 

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SEC Stalls VanEck SolidX Bitcoin ETF till at Least 30th September 2018

The highly-anticipated decision on the VanEck SolidX Bitcoin exchange-traded fund (ETF) has been stalled until at least 30 September 2018, according to an announcement from the Securities and Exchange Commission (SEC) on 7 August. The Bitcoin market dropped from USD 7,150 to less than USD 6,600 as of this writing and it continues to drop, as the Bitcoin community can now clearly see that a Bitcoin ETF will not be approved by the SEC anytime soon.

This particular Bitcoin ETF was the main reason behind the speculative rally in July that pushed Bitcoin’s price up to USD 8,500 from lows of less than USD 6,000. Now, it appears the market is on track to erase all of those gains. The rally initially halted when the SEC issued a 92-page rejection letter for the Winklevoss Bitcoin Trust ETF, which is much like the VanEck SolidX Bitcoin ETF in that it uses actual Bitcoins in its reserves instead of cash. In the lengthy rejection letter, the SEC detailed how the Bitcoin market was too volatile and unregulated to be the basis of an approved financial instrument.

The ultimate message is that no matter how well put together these Bitcoin ETFs are, they stand no chance of being approved under the current administration. Over 1,300 comments were submitted to the SEC regarding the VanEck SolidX Bitcoin ETF, mostly favorable, but they had no impact on the SEC’s decision to delay the ETF decision today. The SEC has the power to delay the decision all the way until March 2019 under their laws,  and the expert who made that calculation expects the SEC to extend the decision deadline to the maximum. All things being equal, in March 2019, the SEC would likely simply reject this ETF.

One of the SEC commissioners says the SEC decision to reject the Winklevoss Bitcoin Trust ETF was a major disservice to investors since it would force investors to trade outside of SEC-regulated markets.

Fortunately, the Commodities Futures Trading Commission (CFTC) is much more favorable towards Bitcoin, and has already allowed the launch of Bitcoin futures on CME and CBOE in late 2017. Also, the Bakkt exchange, backed by the Intercontinental Exchange (ICE), is proposing physical Bitcoin futures. These physical Bitcoin futures, projected to launch in November 2018, will be just as good for facilitating institutional investment as a Bitcoin ETF, if not better and more likely to be approved.

 

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Brian Kelly Proclaims That Bakkt Is Biggest Crypto News of the Year

Hedge fund manager Brian Kelly, while appearing on CNBC’s Fast Money, has called Intercontinental Exchange’s announcement about its new Bakkt platform as the “biggest news of the year.”

Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), recently announced that with the help of technology partner Microsoft, it was planning to launch a new digital asset platform called Bakkt.

ICE also owns 23 exchanges worldwide apart from the NYSE along with many futures exchanges and clearing houses.  Starbucks and Microsoft will be major partners of Bakkt and will begin accepting Bitcoin and other cryptocurrencies. Bakkt is also planning on launching physically-settled Bitcoin futures by November 2018, which would be a mechanism for institutional investors worldwide to easily buy Bitcoin.

Kelly explained his “biggest news of the year” statement after rejecting that ETF would be approved by the SEC this year, suggesting that he’s not actually optimistic on them being approved in 2018, but the speculation surrounding them will maintain investor interest in Bitcoin regardless of the outcome.

He thinks that ICE’s move is better than Bitcoin futures due to its limitations, given that there are “a limited set of people that can trade it… And a lot of people use it for hedging.”

He recently stated that the last Bitcoin price boost following the CNBC announcement was here to stay, only to see the market drop again a week later. When asked if the ICE announcement might have more effect on prices and whether it would meet with success, he responded:

“Oh, yeah! Absolutely! I mean, they are talking about launching in November… They have been working on this in stealth mode for the last 14 months, they have already talked to regulators, they are ready to go.”

He put the lack of market response to “the biggest news of the year” down to time difference and that he expected there would be a response. Bitcoin at the time of writing is $7,473.89 (CMC). He suggested:

“Back in January, Bitcoin would have gone up 20% on this news. So, I think the bear market has just broken people’s spirit, frankly, and so people aren’t really looking for this… A lot of people I talked to today hadn’t seen the news–came out at 08:30 [UTC -04:00]–people hadn’t seen it till 2, 3 in the afternoon. So, the market is still digesting this, and remember most of Bitcoin trading happens in Asia; so, it was released at 08:30 this morning, that’s 09:30, 10:00 at night on a Friday night in Asia. [When] Asia wakes up, you might see this thing pop.”

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Company Gets SEC Attention After Adding “Blockchain” to Working Title

The SEC has subpoenaed Long Blockchain after changing its name and seeing its stock rise dramatically by 289% in December 2017.

Long Blockchain Corp is an American corporation based in Farmingdale, Long Island, New York. Its wholly-owned subsidiary Long Island Brand Beverages, LLC produces ready-to-drink iced tea and lemonade under the “Long Island” brand. The company was formally known as Long Island Iced Tea Corp before using crypto’s basic foundation to promote its “globally scalable blockchain technology solutions”.

This has, unfortunately for the company, drawn the wrong kind of attention from the SEC and has resulted in the company canceling its plans to raise several million dollars through a stock offering and purchase 1,000 Bitcoin mining rigs. A company spokesperson said:

“The company is fully cooperating with the SEC’s investigation… The company cannot predict or determine whether any proceeding may be instituted by the SEC in connection with the subpoena or the outcome of any proceeding that may be instituted.”

Long Blockchain was removed from Nasdaq in April after being accused by the exchange of misleading its investors, resulting in it failing to retain the minimum value to validate it remaining on the exchange. Having shot up to USD 70 million after losing the “iced tea” handle and adding blockchain to its new company name, it is now down to a value of about USD 5 million.

An amusing reference by chance in January was made in an SEC address when Chairman Jack Clayton that the SEC might look into any company “dumb enough” to change its name to “Blockchain-R-Us” and then sell stock without “providing adequate disclosure… about those changes and the risks involved”. He said at the time:

“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.”

That statement does appear to be pointing a finger in a certain direction. Long Island Iced Tea Corp changed its name or “business model”, as Clayton might prefer to call it, in November 2017.

 

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Wall Street Crypto Interest Continues as Fundstrat Accepts Bitcoin

Leading independent Wall Street research organization Fundstrat has announced that it is about to start accepting Bitcoin from global clients.

The trend in Wall Street currently seems split between joiners and leavers, those such as banking giant Goldman Sachs who, having listened to its client base, has demonstrated that it has seen the writing on the wall regarding cryptocurrency, and those leaving comfortable positions in banking to jump on the blockchain bandwagon wholeheartedly.

Those such as JP Morgan blockchain executives Amber Baldet who left to found her own decentralized app store and ex-vice president of Goldman Sachs who jumped ship to fire up a crypto asset management firm, both examples of the current lure of crypto and blockchain on Wall Street.

Fundstrat Global Advisers have decided to become joiners in its announcement that the firm will start accepting Bitcoin payments through Bitpay, the largest global blockchain payments provider. Reportedly, the organization is one of the few macro research firms to follow movements in the crypto environments and has decided to take the plunge. Managing Partner Thomas Lee commented on the move:

“Fundstrat found that accepting payments via BitPay is considerably simpler, faster and less expensive than bank wires… Bitcoin payments make it easier for our clients, particularly those outside the US, by offering more options to pay for our research services without having to deal with the hassles of currency translation.”

Its clients include institutional investors, wealth advisers, pension funds, and wealthy individuals requesting investment reports and profiles including cryptocurrency.

And it is not just Bitcoin that Wall Street is currently taking an increased interest in. Last month’s comments by SEC Director of Corporate Finance William Hinman that Ether wasn’t operating as a security has left its impact on New York’s financial hub, with CBoE’s president Chris Concannon declaring:

“We are pleased with the SEC’s decision to provide clarity with respect to current Ether transactions… This announcement clears a key stumbling block for Ether futures, the case for which we’ve been considering since we launched the first Bitcoin futures in December 2017.”

 

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Thai Movie Theater Chain to Take Digital Currency as Government Opens for Crypto Business

Thailand’s largest movie theater chain has given the green light to its clients for paying for their moviegoing with cryptocurrency according to Bitcoin.com.

Major Cineplex has reported that it plans to integrate cryptocurrency into its current payments system in partnership with Swiss payment company Rapidzpay.

There are currently 143 theaters in the Thai chain throughout the country, the largest being the Paragon Cineplex in capital Bangkok. The company also screens in Cambodia and Laos with plans to increase its total screens in the South East Asia region from 678 to 1,000, according to Forbes.

The massive ParagoCineplex, with 16 screens and 5000 seats, is in the center of a major upmarket shopping hub surrounded by restaurants, an art gallery, a concert hall and numerous retailers. Merchants will be able to use the Rapidz point of sale system which will accept both cryptocurrency and fiat payments. The currencies available for payment have not been announced although the current Rapidzpay app accepts BTC, BCH, and LTC.

The signing of the deal at the Paragon Cineplex was clearly not by chance due to its location within a major retail and service hub. Chanya Tamrongweenichai, the director of marketing at the group commented that:

“Rapidzpay will expand to our other businesses and lead the change for Thailand’s financial ecosystem to be cashless… You’ll be able to buy any services and products from us, such as movie tickets, popcorn and other different products with cryptocurrency.”

The Swiss payment firm has said that it has targeted a million Thai users in its first year in the country hoping that both established crypto users and newcomers to cryptocurrency will realize how convenient this method of payment is.

The Thai Securities and Exchange Commission (SEC) is currently proactive in allowing to cryptocurrencies to be used as a form of payment for goods and services in the country. Currently, the following seven cryptocurrencies are earmarked for official recognition for trading purposes: BTC, ETH, BCH, ETC, LTC, XRP, and XLM.

The SEC’s secretary-general, Rapee Sucharitakul, reflected the nation’s new flexible approach to digital currency when he stated this week:

“…the SEC is (now) open for application approval for operating a digital asset business, as the Finance Ministry’s announcement on digital asset licenses has come into force.”

 

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SEC Commissioner Says Bitcoin ETF Rejection Hurts Investors, Stifles Innovation

There has been a large amount of enthusiasm in recent months across the crypto space that the United States Securities and Exchange Commission (SEC) would approve a Bitcoin exchange traded fund (ETF), which would effectively put Bitcoin on the stock market, and make it easy for institutional investors to buy Bitcoin on all the major stock trading platforms.

However, these hopes were shot down when the SEC rejected the Winklevoss Bitcoin Trust ETF in a 92-page document detailing how the underlying Bitcoin market was not mature or safe enough to approve any Bitcoin ETF. This is combined with the revelation that the VanEck SolidX Bitcoin ETF, which is similar to the Winklevoss Bitcoin Trust, can have its decision delayed until 2019. One of the SEC commissioners who voted on the ETF, Hester Peirce, has issued a dissenting opinion that the SEC made the wrong choice, overstepped its bounds, and didn’t do its job.

SEC commissioner Peirce says, “The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets. Accordingly, I dissent.”

Additionally, Peirce argues that approving a Bitcoin ETF would have created a channel for transparent and regulated investment into Bitcoin, which would protect investors. Not approving the ETF would ultimately keep investments outside of properly regulated channels and harm Bitcoin investors. This is quite the opposite of SEC’s mission to protect investors.

The SEC rejected the Winklevoss Bitcoin Trust based on the dynamics of the underlying Bitcoin market, not on the merits of the ETF itself. Peirce says that the ETF would have been able to follow all of the SEC rules and regulations to ensure lack of market manipulation and that it wasn’t appropriate for the SEC to reject the ETF based on the underlying market.

Winklevoss Bitcoin Trust had a surveillance agreement in place with the Gemini exchange, which Peirce thinks is sufficient because the ETF’s price would have been based on Gemini’s Bitcoin spot price. The SEC demanded surveillance agreements with larger Bitcoin exchanges outside of the United States, which is impractical and not necessary. According to Peirce, the SEC analyzed the Bitcoin market with methods used to analyze other commodity markets that are fundamentally much different, which is inappropriate.

The SEC left the door open for the approval of a Bitcoin ETF in the future if the Bitcoin market matures. Peirce thinks the SEC is slowing down the maturation of Bitcoin by keeping institutional investors out of the market.

The SEC commissioner sees that Bitcoin has numerous unique characteristics that make it worthy of being an investment mechanism, including its electronic nature which facilitates transparency and competition. Bitcoins are interchangeable so investors always get the same thing when they purchase it, and Bitcoin mining is worldwide, insulating it against geopolitical threats, unlike other commodity markets which can be damaged and manipulated by a single country.

 

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Winklevoss Bitcoin Trust ETF Rejected By SEC

Anticipation of the first Bitcoin exchange traded fund (ETF) being approved has helped induce a Bitcoin rally that saw prices climb from USD 6,200 to USD 8,500. The most hyped Bitcoin ETF is one from VanEck and SolidX, but there are other ETFs that have been proposed to the Securities and Exchange Commission (SEC) including the Winklevoss Bitcoin Trust. In a 92-page document dated 26 July 2018, the SEC thoroughly analyzes and rejects the Winklevoss Bitcoin Trust, which might be the reason behind Bitcoin’s drop to USD 7,900 today.

The VanEck SolidX Bitcoin ETF is being hyped up because it uses actual Bitcoins, so if it is approved then it would allow investors to buy Bitcoin on any of the major stock trading platforms. The Winklevoss Bitcoin Trust uses actual Bitcoins as well, and now it has been rejected, raising fears that the SEC is not ready to approve a Bitcoin ETF even if it uses actual Bitcoins. In the past, ETFs that depended on Bitcoin Futures have been rejected for being too risky, and it was thought an ETF which uses actual Bitcoins might be accepted.

The main reason the SEC rejected the Winklevoss Bitcoin Trust is that it says the Bitcoin market is susceptible to manipulation. The SEC can approve a commodity-based ETF even if its market is small enough to be manipulated, but it requires a surveillance sharing agreement between the listing exchange and a major exchange. The exchange looking to list the Winklevoss Bitcoin Trust, Bats BZX exchange, entered into a surveillance sharing agreement with the Gemini Bitcoin exchange, but Gemini is tiny compared to the big crypto exchanges. The SEC says it wants a surveillance sharing agreement with a big Bitcoin exchange to ensure no manipulation, which is something the Winklevoss Bitcoin Trust has no control of.

Clearly, the SEC can use similar reasoning to reject the VanEck SolidX Bitcoin ETF. The SEC goes further to say that most Bitcoin trading is done overseas and not properly regulated. The SEC says that if markets become properly regulated it may approve a Bitcoin ETF, but is clear that in the current situation it would not approve a Bitcoin ETF without surveillance sharing agreements with major exchanges. It is unlikely that major Bitcoin exchanges would consider handing over all of their information to the SEC, especially since none of the major exchanges are in the United States.

While this SEC decision is aimed at the Winklevoss Bitcoin Trust, it is essentially a 92-page research paper explicitly and coherently explaining how the SEC would never allow Bitcoin to be traded on the stock market under current conditions.

 

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VanEck SolidX Bitcoin ETF Decision Could Be Delayed Until 2019

Jake Chervinksy, a legal expert who specializes in government enforcement defense and securities litigation, has done the calculations and says the Securities and Exchange Commission (SEC) has the ability to delay its decision on the BZX Bitcoin exchange-traded fund (ETF) developed by VanEck and SolidX until 4 March 2019.

0/ It kills me to tweet about SEC rulemaking procedures, but given the confusion on #crypto twitter today, it feels necessary.

TL;DR — the SEC can, and probably will, delay its decision on the VanEck/SolidX commodity-backed #bitcoin ETF until ~February 21, 2019.

Thread.

— Jake Chervinsky (@jchervinsky) July 24, 2018

Since federal security laws made a long time ago had no mention of ETFs, every single ETF must get an individualized exemptive order from the SEC, essentially a law change, before it can be traded on the stock market. This is true for all ETFs, not just crypto-related ETFs.

CBOE submitted the BZX Bitcoin ETF proposal on 2 June 2018, and 45 days from that date the SEC will have to make a decision or extend the deadline. The 45 days will be up in early August, which has generated excitement in the Bitcoin community since BZX has the best chance so far to be approved by the SEC as it uses actual Bitcoins, allowing investors to buy Bitcoin on all the major stock trading platforms once it is approved. These stock trading platforms transact trillions of dollars, and it would only take a small fraction of this money going into Bitcoin to cause a massive rally.

The SEC can extend the 45-day deadline three times according to Jake Chervinsky, and they can add another 60 days after that if they feel a longer decision-making period is appropriate. This yields the 4 March 2019 date for the longest the SEC can wait until issuing a decision on the BZX Bitcoin ETF. Jake Chervinsky says, “I can’t imagine the SEC will approve the first ever Bitcoin ETF without taking all the time allowed by law. Sorry. Get ready to wait.”

Indeed, the SEC so far has been rejecting Bitcoin ETFs or extending the time allotted for a decision to be made. For example, the SEC just issued an extension for five Bitcoin ETFs developed by Direxion.

This realization that the SEC’s decision on the BZX Bitcoin ETF might not come any time soon could be part of the reason the Bitcoin market has fallen back to USD 8,000, after peaking near USD 8,500. Additionally, the SEC just rejected a Bitcoin ETF developed by the Winklevoss twins.

 

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ICOs Only Account for Less Than 2% of Securities Lawsuits

A report released by litigation consultancy firm Cornerstone Research indicates that initial coin offerings (ICOs) account for under 2% of securities class action lawsuits – just 12 of 750 cases.

ICOs are not the main offenders… are they even securities?

With the total number of securities lawsuits at levels unmatched since 1995, the report found cases involving ICOs hit just five in the latter part of 2017, and have reached seven in 2018 so far. There have been 111 suits filed in total since the start of the year. While cases filed against American companies are reported to be on the decline, there is a growing number opened against European and Asian companies, nearly double that seen in the last decade.

Whether ICOs even classify as securities is currently up for debate. Securities can be defined as financial assets that represent a proof of ownership in the stake of a company that has intrinsic monetary value, but some argue tokens and cryptocurrencies purchased during ICOs do not qualify under this definition. This disagreement has led many to question whether the US Securities and Exchange Commission (SEC) is even the correct entity to be investigating cases involving ICOs.

Despite much bad press regarding ICOs, several of these few cases opened against crypto-related companies found fault in their reluctance to file their tokens as securities, which is a legal requirement in the US.

In one instance, Ripple (XRP) is facing three separate lawsuits from investors who lost money when they sold the tokens on. The plaintiff in one of these cases argues the XRP classifies as a security because i) they must be purchased with money, ii) investors reasonably expect to profit from them due to Ripple’s own promotional efforts, and iii) the profits collected are determined by the company’s management decisions.

The Massachusetts branch of the SEC suspended five cryptocurrency companies offering ICOs in March this year because they had all failed to register their tokens as securities.

In February, SEC Chairman Jay Clayton declared that ICOs must meet securities regulations, ”end of story”, although in June the SEC voted that Ethereum did not meet the definition of a security. Ethereum and Ripple have fundamentally different structures and use-cases for them, but it indicates a more reasoned, practical approach may be taken by the SEC in the future.

 

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