Apr. 25, 2021
Dear SEC Regulators,
I am a software freedom activist who has spent my career working for
technology-related 501(c)(3) charities. Investing-wise, I am a retail
investor focused primarily on investments in my IRA and other retirement
accounts. I am very familiar with how to purchase Bitcoin and other
so-called “cryptocurrencies” on my own, and have done so.
There are a three key reasons that I think you should approve this ETF and
other ETFs that deal in cryptocurrencies:
* PURCHASE OF CRYPTOCURRENCIES DIRECTLY REQUIRES
A HIGH LEVEL OF TECHNOLOGICAL SKILL.
While it seems trivial for those of us who work in technology, the
complexity of managing private keys and understanding the trading nature
and rules of Bitcoin and other cryptocurrencies is a technological
hurdle for most investors. An ETF with a management fee is a reasonable
way to gain financial exposure to cryptocurrencies in ways that retail
traders and retirement investors already know.
* WHILE CRYPTOCURRENCIES ARE A VOLATILE INVESTMENT WITH DIFFERENT
ECONOMIC RULES AND RISKS THAN OTHER PRODUCTS, THE LEVEL OF RISK OR
CONFUSION TO THE INVESTOR IS NO MORE THAN OTHER ETFS ALREADY AVAILABLE.
For example, in my IRA held at a major brokerage, I own an SEC-regulated
ETF that buys and sell futures for currencies backed by volatile
governments. This is a risky investment, but I hold it to hedge other
investments. I researched the product and its risk, and bought a small
amount to diversify my portfolio.
I even have access to buy all sorts of SEC-regulated ETFs that I avoid
because they're just too confusing for me to understand. For example, I
could buy triple-leveraged ETFs that short major stock indices (which,
in a volatile market, are almost guaranteed to lose money over the long
term). My brokerage warns me of this if I try to trade them, and a
warning about the strange aspects of cryptocurrencies may indeed be
warranted. But, forbidding their existence seems an overreaction.
I just frankly don't see a reason why the SEC would approve other forms
of truly confusing derivative and leveraged ETFs, yet refuse to approve
an ETF for cryptocurrencies. The risks are DIFFERENT, but certainly not
WORSE.
* WITHOUT THESE ETFs, IT IS IMPOSSIBLE TO HOLD CRYPTOCURRENCIES IN AN IRA.
The legislature saw fit long ago to allow USAmericans to invest for
retirement tax-free, paying only regular income tax later in life on
both the gains and initial investments. Later, they created the Roth
IRA program, allowing individuals to invest already-taxed funds and let
the returns remain tax-free until retirement time. While I do think we
should improve our social safety net, in the meantime, investing through
IRA programs is the only way that most USAmericans can invest in their
future. The rich tend to get richer in part because they have
opportunities for investment that the rest of us don't have.
Cryptocurrency ETFs will allow the average investor, for the price of one
share, to diversify their investments into this new area. Denying this
ETF simply furthers the divide between the 1% and everyone else with
regard to their investment opportunities.
In closing, I want to note that I am not actually as bullish on
cryptocurrencies as most people in the technology industry. Unlike most
you'll hear from in my field, I don't think cryptocurrencies are some
central part of our future. However, it IS an form of investment that has
unique differences from already available investment choices.
Most important to me as individual small-time investor, and speaking here
(if I may) for all small-time individual investors: we deserve to have our
portfolios to be just as diverse as the hedge funds, Wall Street firms, and
big tech companies. They all have holdings in cryptocurrencies to diversify
their investments; we deserve the same opportunity.
Sincerely,
--
Bradley M. Kuhn - he/him