New details have surfaced about the bitcoin exchange-traded fund (ETF) proposed by Bitwise and NYSE Arca.
Bitwise Asset Management announced its intention to launch the ETF earlier this month. If approved, it would be the first bitcoin ETF to make it to market in the U.S.
At the time, the company said NYSE Arca would file the 19b-4 rule change proposal in the near future. NYSE Arca indeed filed the form the same day, but it does not appear to be listed on any SEC website, possibly due to the ongoing U.S. government shutdown.
As a result, the document went largely unnoticed, despite being posted on NYSE Arca’s own website. (An SEC spokesperson did not immediately respond to a request for comment.)
When Bitwise first announced the ETF proposal, the company said it differed from previous such efforts because a regulated third-party custodian would store the bitcoins. The company also said it would draw pricing data from a large number of exchanges, including both spot and physically settled futures markets, to calculate the index determining the assets’ value.
The filed proposal elaborates on the methodology, noting, for example, that these prices will be “weighted such that bitcoin prices from exchanges with a greater amount of the trading volume in the prior hour are weighted more heavily than bitcoin prices from exchanges with lesser amounts of volume.”
“The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest,” the proposal says. In previous ETF rejections, the SEC has highlighted concerns about market manipulation.
NYSE Arca’s proposal also touched on concerns about what impact any such manipulation might have on the bitcoin market, stating:
“… given the fungible nature of bitcoin, the Index Provider believes that the potential impact on Index values of individual exchanges experiencing outside attempts to manipulate either reported volume or reported prices is muted by the use of a large number of exchange price and volume inputs.”
While NYSE Arca has filed the proposal, the clock has not yet started for its approval or rejection. Attorney Jake Chervinsky, of law firm Kobre Kim, told CoinDesk that “the SEC’s deadline for deciding an ETF proposal is triggered by publication in the Federal Register.”
“That almost certainly won’t happen until after the government shutdown ends,” he said via email. “According to the SEC’s operations plan, they have discontinued all processing and review of proposed rule changes due to the lapse in appropriations.”
Previous bitcoin ETF proposals have been withdrawn or rejected, with Cboe most recently pulling its joint effort with VanEck and SolidX earlier this week. VanEck CEO Jan van Eck cited the government shutdown as a key reason for this, explaining that the companies were having conversations with the SEC prior to the shutdown, but that these conversations had ceased. However, he said the companies would re-file after the government re-opens.