Nov. 30, 2023
Dear Sir, Dear Madam
I would like to take this opportunity to share my opinion on the Bitcoin Spot ETF and your questions.
1. As a risk manager at a Swiss bank, I have certain concerns about the introduction of the Bitcoin Spot ETF. The basic prerequisite for authorization would have to be that the coverage of the fund units with Bitcoin can be controlled without trust and without a third party. In my view, the proposed control mechanism of mutual verification is unsuitable for preventing fraud in the long term and is based solely on trust in the exchange and the fund issuer. This contradicts the ethos of Bitcoin, precisely because a technical solution would be possible. Why is the fund issuer not obliged to disclose the Bitcoin address with the deposited Bitcoins? This can also be done anonymously by means of a signature. This would also prevent deposited Bitcoin from being used as collateral for several ETFs.
In principle, the Bitcoin ETF is only necessary for companies due to accounting regulations. Wouldn't it be smarter to adapt the accounting regulations so that Bitcoin does not affect the results of the core business?
If the ETF is no longer covered one-to-one over time, this could have serious consequences for investors. The price would decouple from Bitcoin and financially harm all investors. Asset managers and fund issuers could also find themselves in financial difficulties. Will they then be rescued by the FED with newly printed money?
Satoshi Nakamoto has given the people a trustless, non-corruptible digital and fair money that can no longer be stopped. It is sufficiently transparent and technically possible that we do not need a trusted party to confirm that the Bitcoin ETF is fully backed. Anyone could check for themselves. There is now an opportunity to establish a new standard of transparency for dealing with Bitcoin, which has not been possible before in human history. America, the land of freedom and unlimited opportunity, should seize this opportunity. Nothing would be worse for investors, but also for the country's reputation, than an uncovered spot ETF.
2. I think the Bitcoin market has already passed the critical point 3 years ago and will only get bigger. As a result, the current volatility and the risk of manipulation are becoming smaller and smaller.
3. The arguments put forward by the stock exchange are not very trustworthy and, in some cases, irrelevant. The most important thing is that the bitcoins shown are available and securely stored.
4. The mutual monitoring of the exchange and Coinbase is based solely on trust without giving me as an investor the opportunity to check, although this would be technically possible without any problems by means of a signature. How can we know that Coinbase is not using one Bitcoin address as collateral for several ETFs? Why not eliminate this risk from the outset, for example by assigning a specific bitcoin address to each fund share? In my view, this agreement is not suitable to be "helpful in detecting, investigating and deterring fraud and market manipulation". It is usually only a matter of time before trust is abused. Bitcoin's gift is that we no longer have to trust. So don't trust, verify!
I hope that the SEC will have the power and not approve the spot ETF until there are no more security concerns regarding coverage and storage. Otherwise, I am convinced that it will have a negative impact on everyone involved in a few years.
Kind regards,
Freundliche Grüsse
Alpha RHEINTAL Bank AG
Alexander Rohner
Kundenberater Risikomanagement
Bahnhofstrasse 2 | Postfach | 9435 Heerbrugg | T +41 71 747 95 64
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