12th August 2023 > > ETFs and Boyaa.

tl;dr

The SEC has announced a delay in BTC ETFs, but that doesn’t stop another company adding cryptos to its balance sheet.

Market Snap

Market Wrap

No price action for cryptos.

Curious Cryptos’ Commentary – BTC ETF

And the SEC decision regarding Ark’s application for a spot based BTC ETF?

A delay. No-one is surprised by this turn of events. You can read it here:

https://www.sec.gov/files/rules/sro/cboebzx/2023/34-98112.pdf

That’s 86 pages of (mostly) guff, but at least some SEC pen-pushers had some busy days for a change to justify their outsized remuneration package at taxpayers’ expense.

But I am surprised by the reason for the delay. The SEC has given three weeks for public comment on the application, and an additional five weeks for the SEC to respond to that public comment. That takes us up to 6th October before we get any more insight into the SEC’s thinking, but overall, this must be a positive development.

In the letter from the SEC referenced above, there is another paragraph that is also being touted by most news outlets as positive:

"In sum, the Exchange believes that this proposal is consistent with the requirements of Section 6(b)(5) of the Act, that this filing sufficiently demonstrates that the CME Bitcoin Futures market represents a regulated market of significant size, and that on the whole the manipulation concerns previously articulated by the Commission are sufficiently mitigated to the point that they are outweighed by investor protection issues that would be resolved by approving this proposal.”

And at first reading, if this is the SEC’s stance, then yes, the deal looks done.

But what everyone appears to have missed is that this is a copy and paste of the application to the SEC for an ETF, not the SEC’s response to that application. A small, but vitally critical difference.

…

The detailed questions can be found on page 82 to 84 (remember – the CCC reads these documents, so you don’t have to). In broad terms, the questions relate to these four points:

- Is BTC a suitable product for an ETF?

- Is the CME (futures market) a regulated market of significant size?

- Is there enough data to justify positive responses to the first two questions?

- What are respondents’ views about the surveillance sharing agreement (SSA)?

The SEC has already definitively answered the first two questions itself when it approved the first futures based BTC ETF in the US during 2021. It can hardly back down on that now. In which case, question three is also answered in the affirmative.

Which just leaves the SSA, which is the new defining feature of all current ETF applications, created in the first instance by Blackrock.

I am at a loss to understand why the SEC cannot make up its own mind unless this “consultation” is merely another delaying device.

…

The CCC is forever balanced in its outlook. Let’s see what Scott Farnin, Legal Counsel at Better Markets (who?) has to say:

“… the principal beneficiaries of the crypto craze are the criminals who use it to facilitate ransomware, money laundering, and illegal conduct of all types. It is within this context that the SEC must evaluate (the) latest wave of Bitcoin ETF filings this month.

For years the SEC has rightfully rejected multiple attempts by national securities exchanges and sponsors to list and trade shares in spot bitcoin-based ETPs. Our comment letters urge the SEC to remain consistent with its previous orders disapproving such filings and reject the eight proposed rule changes pending before the agency.”

“Crypto craze.” Ha.

Tired old tropes about money laundering (has he never seen a EUR 500 note?).

Dear, oh dear.

Farnin is remarkably keen to demonstrate his ignorance. He most certainly does not understand the concept of decentralisation, or that markets and products are two separate things:

"The spot bitcoin markets … rely on a select group of individuals and entities to maintain bitcoin’s network."

I assume that Farnin is a general in Senator Elizabeth Warren’s anti-crypto army. I do hope so, for that means the opposition is bereft of intellectual heft.

Curious Cryptos’ Commentary – Institutional adoption of cryptos

Boyaa Interactive International Limited has announced that it will buy $5mm of BTC and ETH for its own balance sheet over the next year:

https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0810/2023081001308.pdf

So what, I hear you cry.

Institutional adoption of cryptos is a slow burn, made slower by the SEC’s actions we talked about above. And the slowest arena for adoption is corporate balance sheets, even slower than pension funds. But each time another company is added to the roster of crypto owners, the pressure builds on others from their more ambitious shareholders.

But there is more!

Boyaa is based in Hong Kong.

Xi and his murderous henchmen would not allow this to happen unless they personally approved. Wholesale adoption of cryptos by China becomes more real by the day.