Cryptocurrency Firm Bitwise Asset Management Seeks SEC Review of New Bitcoin ETF

According to an initial registration statement published on January 10, the cryptocurrency index fund provider Bitwise Asset Management has applied with the U.S. Securities and Exchange Commission ("SEC") to form a new bitcoin-backed exchange-traded fund ("ETF"). The Bitwise Bitcoin ETF Trust seeks approval to issue and redeem shares that trade on the NYSE Arca, Inc. stock exchange in blocks of 25,000 shares. If approved, the Bitwise Bitcoin ETF Trust will be the first of its kind.

Bitwise Asset Management's SEC Form S-1 states that the Bitwise Bitcoin ETF Trust will track the performance of the total returns available to investors in bitcoin, as measured by the Bitwise Bitcoin Total Return Index.[1] The ETF will invest substantially all of its assets in bitcoin traded on cryptocurrency exchanges.[2] In a press release, Bitwise Asset Management stated that the proposed ETF differs from previously filed bitcoin ETFs in that it will rely on regulated third-party custodians to hold the physical bitcoins.[3]

Despite growing public demand, the SEC has yet to grant an application to list a bitcoin-backed ETF. Previously rejected applications include that of Bats BZX Exchange, Inc. (BZX), which sought to list and trade shares of the Winklevoss Bitcoin Trust.

In a July 2018 order rejecting BZX's application, the SEC concluded that the proposed cryptocurrency-based ETF conflicted with Section 6(b)(5) of the Securities Exchange Act of 1934.[4] The provision requires, in relevant part, that the rules of a national securities exchange be designed "to prevent fraudulent and manipulative acts and practices" and "to protect investors and the public interest."[5] The SEC explained that BZX must demonstrate an ability to reach a surveillance-sharing agreement with "a regulated, bitcoin-related market of significant size" in order to carry its burden of establishing compliance with the Securities Exchange Act.[6] BZX failed to carry this burden because its proposal did not support a finding that the markets for bitcoin and derivatives of bitcoin are significant or regulated.[7] At this time, the SEC has yet to set forth parameters regarding the scope of the term "significant market."

In a press release, Bitwise Asset Management expressed optimism that the SEC will reach a different conclusion with respect to the Bitwise Bitcoin ETF Trust. A representative stated that the firm spent 2018 researching the SEC's concerns regarding the "quality of the crypto trading ecosystem, the reliability of crypto pricing, the strength of the arbitrage function in crypto, and the robustness of crypto custody."[8] Based on its research, Bitwise Asset Management now believes it can provide the SEC with sufficient information to address these concerns.

An application by SolidX, VanEck, and CBOE to list an ETF known the VanEck SolidX Bitcoin Trust on the NYSE also remains pending before the SEC.

[1] U.S. Securities and Exchange Commission, Form S-1: Bitwise Bitcoin ETF Trust Preliminary Prospectus (Jan. 10, 2019),

[2] Id.

[3] Bitwise Files for New Bitcoin ETF, Bitwise Asset Management (Jan. 9, 2019),

[4] See U.S. Securities and Exchange Commission, Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Setting Aside Action by Delegated Authority and Disapproving a Proposed Rule Change, As Modified by Amendments No. 1 and 2, to List and Trade Shares of the Winklevoss Bitcoin Trust (July 26, 2018),

[5] Id. quoting 15 U.S.C. 78f(b)(5).

[6] Id.

[7] Id.

[8] Bitwise Files for New Bitcoin ETF, Bitwise Asset Management (Jan. 9, 2019),

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