As SEC deadline looms, could the Winklevoss ETF be about to sink?

As SEC deadline looms, could the Winklevoss ETF be about to sink?

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I’ll be honest with you: I’m not sure I like the idea of boys in striped jackets trading bitcoin on the open stock market, without ever having to find out how, where and why to invest in the project. Part of bitcoin’s appeal for so many of us is its ideology – taking currency outside of traditional channels and into the hands of the communities who use it. From this perspective the Winklevoss brothers are potential usurpers, rogue agents whose agenda is the corporatisation of bitcoin. Can you believe these guys?!

Personal opinions aside (temporarily), here’s a quick catch-up for readers who aren’t up to speed with all things Winklevoss. Twin brothers Tyler and Cameron Winklevoss (of failed Facebook ownership claim fame) have developed an exchange trading fund (ETF) which would allow stock market investors to trade bitcoin without ever having to buy and sell them directly. This would be achieved by creating shares backed by the Winklevoss’s personal portfolio of bitcoins. However, permission from the Securities and Exchange Commission is first required, since the bitcoin ETF project does not comply with the current regulations. First filed for consideration 3 years ago, the final no-more-extensions deadline is now imminent: the SEC is committed to deciding by 11 March 2017.

What’s in it for investors?

To answer this question, you only have to look at the bitcoin price charts for the last few months. Potentially a lot of money. Reportedly owning 1% of the world’s bitcoins, the Winklevosses plan to create 10 million shares priced at $10 each, creating a $100m market for speculators who want to trade bitcoin ‘at arms length’. Additionally, they boast some of the most sophisticated bitcoin security available, including theft-proof cold storage and a pledge to support only the forks with the greatest computational difficulty – it’s an attractive proposition for investors to say the least.

Of course, you can’t answer this question without also asking, what’s in it for the Winklevoss bros? Can they be trusted to treat bitcoin with care, or will they be unable to resist the temptation to create a bubble, make a killing and then walk away when it all falls apart?..

What’s in it for the SEC?

When it comes to predicting whether or not approval will be given, this is one of the most important questions. According to its mission statement, the SEC exists to protect investors (among other things). While there’s no such thing as a guarantee in the world of stocks and trades, it’s safe to say that the SEC has a pretty good understanding of the risks and balances in place to keep the stock market from descending into chaos. What it doesn’t have, however is any experience whatsoever in regulating an ETF that deals in a solely digital product. Furthermore, it’s extremely unusual for the SEC to approve a USA based ETF backed by assets that operate primarily outside the country. Could this explain the 21 filings to date over a 3 year period with not even a crack in the SEC’s poker face?

Another way to look at this is from the SEC officer’s point of view. If you’re responsible for approving the bitcoin ETF, and it fails, a lot of very powerful people will lose a lot of their precious money. You’re probably going to get fired. But if it’s a success – even a huge one – you’re not going to get the credit, let alone a raise or a promotion. After all, you’re just doing your job, right?

Some experts are saying that failure to make a decision by the deadline will result in approval by default thanks to the regulations governing the SEC itself. As per usual though, it’s speculation all round until we hit deadline.

Time for bitcoin to grow up?

Maybe part of my reluctance around this project is a sense of paternalism. I’ve seen bitcoin through those difficult early years, and stood by her in good times and bad. I’m not sure I’m ready to send her out into the big, ugly world just yet.

But it ain’t up to me. Whatever our initial intentions were, bitcoin is now big business, so it’s only a matter of time before the vulture capitalists start circling. And for all my reservations, it’s not all bad news. We could all stand to benefit significantly as individuals and as a community if the Winklevoss boys can finally shrug off that sore loser monkey on their back. Bitcoin’s bouyant price this month could be attributed to anticipation of the ‘rumoured’ SEC approval. (I’d like to know who started that rumour, by the way.) If they’re right, maybe it’s the start of bitcoin’s progression to the mainstream. Politics aside, if you’re an early adopter like me, you could stand to do very well as a result. Hold onto your hat, and I’ll see you on the other side.

This article represents the personal opinion of the author and is not a recommendation to buy or sell Bitcoins.