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SEC: Delist Everything Except for Bitcoin



The US Securities and Exchange Commission (SEC) told Coinbase that most of the digital tokens it has listed are unregistered securities that fall under its jurisdiction and it should delist them all. In a recent interview with the Financial Times, Coinbase CEO Brian Armstrong revealed that the SEC asked his company to stop trading in all cryptocurrencies other than Bitcoin, before suing the exchange in June for operating as an unregistered securities broker.

SEC makes a distinction between Bitcoin and other cryptos.

While the SEC has not provided a clear explanation of how it determines which cryptocurrencies are securities, the legal framework provided by the Howey test does this quite explicitly. Derived from a 1946 Supreme Court case the Howey Test has 4 requirements:

  1. Investment of money.
  2. In a common enterprise.
  3. With the expectation of profit.
  4. From the efforts of others.

What are the arguments supporting the SEC’s position?

The SEC argues that its enforcement actions are necessary to protect investors from fraud and manipulation in the crypto market, which it considers to be a “Wild West” with no rules or oversight. The SEC also claims that it is upholding the rule of law and ensuring a level playing field for all market participants, regardless of the technology or innovation involved.

Some of the arguments in favour of the SEC’s position are:

  • The SEC is fulfilling its statutory mandate to regulate securities markets and safeguard investors’ interests.
  • It is providing clarity and certainty to the crypto industry by applying existing securities laws and precedents.
  • The SEC is preventing unfair and abusive practices by crypto issuers and platforms that may harm investors or undermine market integrity.

What are the arguments opposing the SEC’s position?

The crypto industry and its supporters have been challenging the SEC’s position, arguing that it is stifling innovation and growth in the crypto space, which they see as a new frontier of technological and financial development.

Some of the arguments against the SEC’s position are:

  • It is overstepping its authority and jurisdiction by applying securities laws to cryptocurrencies that are not securities but commodities, currencies, or utility tokens.
  • The SEC is hindering innovation and competition by imposing excessive and outdated regulations on crypto projects that are not comparable to traditional securities offerings.
  • Regulatory ambiguity is creating confusion and uncertainty by failing to provide clear and consistent guidance on how it classifies and regulates cryptocurrencies.
  • The SEC is harming investors and consumers by limiting their access and choice to crypto products and services that offer more efficiency, transparency, and inclusion than traditional financial systems.

Regulators battle in turf war: SEC vs CFTC

The regulatory battle between the SEC and the Commodity Futures Trading Commission (CFTC) is another source of complexity and controversy in the crypto space. The CFTC is a federal agency that oversees derivatives markets, such as futures and swaps, and has asserted its authority over some aspects of the crypto market, such as Bitcoin futures contracts and platforms that offer them.

However, there is an overlap and a conflict between the SEC and the CFTC’s jurisdictions, as some cryptocurrencies have been claimed to be both securities and commodities, depending on who you ask. For example, Ethereum (ETH) has been claimed by both agencies as falling under their respective domains.

This battle between the SEC and the CFTC has created confusion and uncertainty for crypto businesses and investors.

Complexity in the USA; The World Keeps Turning

While US regulators quarrel, and the SEC undertakes a broader crackdown on cryptos as well as continuing to reject Bitcoin ETF applications, the rest of the world has moved on and listed Bitcoin listed funds:

  • Brazil
  • Canada
  • Australia
  • France
  • Switzerland
  • Germany
  • Netherlands

Bitcoin ETFs are seen as a way to provide easier access and exposure to Bitcoin for mainstream investors, who may prefer a regulated and convenient way to invest instead of self-custody. However, the SEC has rejected every single Bitcoin ETF application to date, ostensibly due to concerns about market manipulation, fraud, and investor protection. Nobody believes this.


Markets Expect Bitcoin ETF




What is a spot Bitcoin ETF, and why is it all over the news?

ETFs can be confusing, so we are going to make you smart on this.

First of all, an ETF is a security listed on an exchange, and so the price will fluctuate throughout the day, according to the performance of the underlying index or asset/security, and investors can buy or sell throughout the day as they wish.

The most common asset ETFs are ones for gold and silver.

In essence:

An investor buys or sells the ETF, the ETF manager then buys or sells the underlying asset to match the NAV of the total amount invested in the ETF. Some of the best ETFs allow for the investor to exchange their shares for the underlying asset (gold, etc).

So, what about Bitcoin and the various ETFs out there and up for approval?

Now let’s get something rail-straight: Spot ETFs and Futures ETFs are not equal.

As you undoubtedly already know, while there are currently a number of Bitcoin futures ETFs available and trading, and there have been for years now.

Meanwhile, we are still waiting for the SEC to approve the spot version of a Bitcoin ETF. Something they have been reluctant (read: have refused) to do yet. Even though there are various Bitcoin spot ETFs that trade outside of the US, such as the Fidelity Bitcoin Spot ETF in Canada.

Still, you may ask: if both types of ETFs are seeking to track the price of the underlying asset or assets, so what’s the difference?

Turns out, the difference, while seemingly simple, is quite significant.

First off, a futures ETF is more of a betting contract than an actual security. See, this type of ETF owns no assets other than paper futures (contracts to buy and sell BTC at a given price on a future date). When you buy a futures ETF (or sell one), you are only really exchanging cash for the underlying futures contracts (not actual BTC).

And while the futures ETF somewhat tracks the price of BTC, the reality is that it is almost impossible for it to be 100% accurate.

See, because futures contracts expire at the end of each month, a futures ETF like Valkyrie’s BITO must sell its position before expiration and then purchase contracts for the next month. As a result, the price of the underlying asset, BTC here, can be much different than the futures contracts that are trading, and the buying and selling of the contracts can be costly (estimated at ~10% annual currently).

Most importantly from all this, because institutional investors understand the poor price tracking and expensive proxy for actual Bitcoin, they are reluctant to use a BTC futures ETF to gain exposure to Bitcoin. Rather, the futures ETF has become a way for institutions to short exposure to Bitcoin in an, albeit sloppy and inefficient, attempt to hedge out volatility in their portfolio instead.

And of course, use the Futures ETFs to arbitrage the price difference. This is usually done by leveraged hedge funds.

In contrast, a spot ETF actually owns the underlying asset it is seeking to emulate. In the case of a spot Bitcoin ETF, the ETF sponsor would actually buy and sell BTC, according to inflows and outflows of capital, and maintain the storage and keys of the underlying BTC through an institutional custodian.

As a result, most large institutions and Registered Investment Advisors (RIAs) are waiting for the approval of a spot ETF to gain exposure to BTC.

An obvious question would then be: why don’t these portfolio managers just buy actual Bitcoin instead?

While it may sound simple, it is truly far more complicated for institutions to own Bitcoin than individuals. This primarily has to do with internal policies, investment mandates, regulatory and compliance issues, as well as logistics such as settlement, pricing, and custody of an asset like Bitcoin.

Because of this, buying and owning of actual Bitcoin presents not just portfolio risk, but career risk for them.

Bottom line, many institutions are just waiting for an SEC-approved US-based spot ETF to gain their exposure to Bitcoin.

Spot Bitcoin ETF Approval Is Imminent

There are currently at least 12 spot bitcoin ETFs seeking approval—all of them are amending their prospectus’ regularly as the SEC issues new guidance in an effort to speed approval times:

You will notice that one of them is GBTC, which is already trading.

GBTC was created as a closed end trust, because it was a way to do an end-zone run around the SEC and list a security with underlying Bitcoin without going through the ETF approval process.

Because of creation and redemption limitations, though, GBTC has proven to be problematic and a poor proxy for Bitcoin ownership. And so, the managers are seeking to convert GBTC from a trust into a spot ETF.

This would allow for daily creation and redemption, something not possible with the trust structure, and GBTC would instantly become a proxy with much less delta between the trading price and actual Bitcoin price.

A number of these applications have been rejected and delayed for over a year now.

So, what is taking so long?

According to the SEC, because exchanges that trade Bitcoin are all over the world, the SEC has claimed that there is a possibility of manipulation. They have insufficient oversight of the trading and custody of the underlying asset.

Apparently Gary Gentler has not looked too closely at the futures Bitcoin ETFs, or gold for that matter.

In any case, we don’t believe there is any legitimate reason for the SEC to continue to outright reject the applications for the spot ETFs, and we expect imminent approvals.

We are talking weeks or or a few months, at most.

Question is: what happens historically to the price of underlying spot assets when their ETFs are approved?

Well, since this type of situation has not truly occurred before, it is hard to say.

Especially because the best proxy would be gold.

But gold can be manipulated and re-hypothecated, as it is extremely difficult for oversight. Gold can be claimed to be stored in vaults, but not actually be all there. Gold can be claimed to be real, but be gold plated iron bars.

Yes, this happens.

In direct contrast to gold, however, Bitcoin is easily verifiable, tracked, and audited through a public ledger. This makes it exceedingly difficult for the spot ETF managers to commit fraud or be defrauded with the physical holdings of their Bitcoin.

The appetite?

Ernst & Young accounting firm is estimating that over $200 trillion of institutional assets are available but unable to purchase Bitcoin.


But when a spot Bitcoin ETF is approved, they will be open to allocate to Bitcoin as an investable asset.

Some quick math: a 1% allocation of that $200 trillion would give us $2 trillion of capital inflows to an asset that currently has a total market cap of $670 billion.

Even without any trading friction whatsoever, this more than triples the price of Bitcoin.

But let’s not get ahead of ourselves. Let’s look at some more real-world data, such as price activity of GBTC, to gauge an immediate appetite for investors.

You notice that GBTC is rapidly converging with NAV, as investors front-run the institutional-sized flows that are expected to follow spot ETF approval.

And one more security to note, BITO, the most popular US-listed Bitcoin futures ETF, had its largest week of trading at $1.7 billion — again, as traders front-run the flows and spot appreciation of the coming spot ETFs:

In these two ways, and as we demonstrated in last week’s report on Bitcoin’s recent rally, the market is voting with its capital that a spot ETF is coming to market imminently.

Do ETF analysts think a spot BTC ETF is almost here?

Looking at a timeline from Bloomberg analyst, the latest survey points to late November at the earliest, with early-mid Q1 2024 being the most likely time that spot ETFs are approved.

As you can see, with Bitcoin’s price diverging positively from a negative risk asset market this past two weeks, and all signs pointing to high degrees of confidence from the markets that Bitcoin ETFs are coming, it is challenging to maintain level-heads.

But even without the price activity and market enthusiasm, we can objectively agree that there is little left for the SEC to do but concede that it’s time.

The markets are ready, and the markets are demanding it.

A spot Bitcoin ETF (or perhaps a dozen of them) is coming.

Prepare accordingly.

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US Dollar Backed by Bitcoin: Robert F. Kennedy Jr’s Bold Plan




Presidential Candidate Robert F. Kennedy Jr. has announced plans to back the U.S. dollar with Bitcoin and exempt Bitcoin from capital gains taxes. 

Kennedy’s innovative plan is simple: “My plan would be to start very, very small; perhaps 1% of issued T-bills would be backed by hard currency, by gold, silver, platinum or Bitcoin.” The success of this initial step will determine future increases in allocation.

RFK Jr has made Bitcoin a key plank of his Presidential campaign.

A New Era of US financial stability, peace and prosperity.

Kennedy believes this policy could bolster the U.S. dollar and re-affirm its position as the world reserve currency. “Backing dollars and U.S. debt obligations with hard assets could help restore strength back to the dollar, rein in inflation and usher in a new era of American financial stability, peace and prosperity.”

A Kennedy administration plans to exempt Bitcoin from capital gains taxes:

“The benefits include facilitating innovation and spurring investment, ensuring citizen privacy, incentivising ventures to grow their business and tech jobs in the United States.”

Kennedy has been forthright about defending the right to own and self-custody Bitcoin, run a node at home, and he advocates for industry-neutral regulation of energy, which is critical to Bitcoin mining.

Fiat Currency Funds Wars

“Fiat currency was invented to fund wars. I like base currencies because they make it more difficult, you have to go to the public. You can’t just print money to fund the war and tax the public through the hidden tax of inflation,” says Kennedy.

Kennedy’s proposal for the U.S. Treasury to acquire assets like Bitcoin and precious metals is a strategic move to insure against the country’s mounting debt at a time when global sovereign default risks are rising.

Kennedy sees Bitcoin as more than just an asset. It’s a prudent policy tool to ensure the nation’s fiscal longevity. It’s an opportunity to attract intellectual capital to U.S. shores.

RFK Jr Bitcoin Ownership and Campaign Donations

Investment disclosures revealed that Kennedy owned up to $250,000 worth of Bitcoin. He also announced that he would accept political campaign donations in Bitcoin. 

Growing Political Support for Bitcoin

The 2024 Presidential race marks a significant change in US politics as Bitcoin is not only an issue on the agenda for the first time, but leading candidates have recognised the ever growing and fervent constituency supporting the right to own Bitcoin. As the political landscape around Bitcoin changes rapidly, Kennedy stands as a vocal figure embracing this change, but he is not alone. Leading Republican Presidential candidate Ron DeSantis is also an ardent supporter and has spoken strongly in support of citizens rights to hold Bitcoin.

Whatever their campaigns amount to in 2024, Bitcoin is now on the national agenda. BlackRock — the largest fund manager in the world — is embracing it, and we are fast approaching the tipping point of mainstream adoption. Bitcoin can no longer be ignored.

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