Cboe pushes Bitcoin case for ETF Approval in New Letter

Cboe expects Bitcoin futures volume to be comparable to other commodity futures products in the near future

David Nurieli
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The maturation of the digital-currency market continues to face headwinds as the standoff between regulators and proponents rolls on. A senior executive for Cboe Global Markets believes that the market could support the launch of a bitcoin exchange-traded product (ETP), according to a new letter sent to the U.S. Securities and Exchange Commission.

In an open letter to the Securities and Exchange Commission, Chris Concannon, president and COO of Cboe Global Markets, laid out a case for a bitcoin exchange-traded products, citing data and projections that it hopes will alleviate concerns regulators have with such a product.

Cboe and rival CME Group Inc have successfully launched cash-settled bitcoin futures contracts, however, which the exchange operators self-certified in December and are regulated by the Commodity Futures Trading Commission.

"While the 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, 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, “ wrote Concannon

Cboe believes ETFs would give investors a more transparent and accessible way to get exposure to cryptocurrencies than the spot market.

Cboe has pioneered bitcoin's entrenchment into mainstream Wall Street, launching the first market for bitcoin futures in the US in December. That followed an earlier attempt by Bats, an exchange acquired by Cboe in 2017, to trade a bitcoin-ETF from the Winklevoss twins. Such a product could serve as a powerful on ramp for retail investors to dive into the cryptocurrency.

His letter was a response to a January release from the SEC, in which it outlined its concerns over approving an ETF, citing market fragmentation and investor protection shortfalls in particular.

In his response, Concannon noted that although they are young, the bitcoin commodity markets "are developing quickly," which is promising for future exchange-traded products (ETPs).

Furthermore, he wrote that he sees the markets for government-issued currencies and gold as being "probably more fragmented" than cryptocurrency markets, noting that "there are a lot of venues to access currency markets."

"While Cboe shares many of the concerns raised in the Staff Letter, we believe that the vast majority of these concerns can be addressed within the existing framework for commodity-related funds related to valuation, liquidity, custody, arbitrage, and manipulation," the letter noted.

Yet bitcoin has been volatile, swinging from a 2018 high of $17,234.99 on Jan. 6 to a low of $5,920.72 on Feb. 6, and trading on Monday at about $8,092. Many investors remain leery, and the SEC has been cautious due to several massive cybersecurity breaches that have hit bitcoin owners and exchanges and a lack of consistent treatment of the assets by governments.