Mar. 09, 2022
To the SEC: I am writing to support the creation of a spot market Bitcoin ETF(s). The current offering of ETF’s that involve Bitcoin (BTC) futures are structurally horrible problem given the contango effects of prices eventually converging to spot. While the SEC has stated that they are concerned about spot market BTC manipulation, the horrible impact of contango makes a BTC futures ETF even worse. Crypto currencies are now at least a $2 trillion asset class. Blockchain is a legitimate technology which means digital assets are going to be around for a long time. I recognize that many compliance and regulatory issues are relevant for the SEC and need to be clarified. But a good start here would be to take the oldest and most secure crypto currency, BTC, and allow it to exist in a mechanism that treats investors fairly. It is not fair that the only alternative to a BTC futures ETF’s, the Grayscale BTC Trust, now trades at almost a 30% discount to NAV. It’s hard for me to reconcile that the SEC would allow a flawed futures BTC ETF and let investors in the Grayscale BTC Trust eat a whopping 30% discount. The SEC’s role in protecting investors should speak to and cover market inefficiencies like this. Both of these vehicles are inefficient and for various reasons inflate the cost of capital for these products making for inefficient pricing in the form of underlying asset pricing detracting from investor return and therefore efficient asset pricing. In addition, the custody issue of crypto is a very problematic issue for individuals and institutional investors. While the phrase, “not you keys, not your crypto” may be technically true, the issue of self-custody for individuals is highly problematic if passwords are forgotten or cold wallets are lost. While there are a myriad of issues that need to be solved for crypto or digital assets, solving the cash market BTC ETF would be a great start. Canada has done this, so it’s very hard for me to imagine that we can’t do this in the United States. We already have large crypto exchanges that are regulated with plenty of liquidity. Monitoring trading in the exchanges for manipulation similar to the CBOE or Chicago Merc would seem doable. I do urge progress on this matter, and I hope the SEC will endeavor to move the ball north on digital assets. Blockchain and crypto currencies or protocols are going to change many businesses because in many cases they are a better way to send money and do business. No doubt some of our leaders feel threatened by them but that’s probably because they realize that it upsets some of the current monopoly positions held by some sectors of the banking system and other financial institutions. With proper regulation, the playing field should be open to all and legacy players will have an equal chance to change their models. But in the meantime, solving the BTC ETF issue is a relatively simple move in the right direction. Thanks for reading. Sincerely, Jeff Van Harte