Subject: comment (Release no 34-78262, File no SR-BatsBZX-2016-30): Notice of Filing of a Proposed Rule Change to BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, to List and Trade Winklevoss Bitcoin Shares Issued by the Winklevoss Bitcoin Trust
From: Mike Johnson

March 6, 2017

Dear Commissioners,
I feel strongly that if the SEC approves Bitcoin they will be in dereliction of their duty. The primary objective of the SEC is to protect investors1 Bitcoin, in it's current form, is not stable or proven enough to be available to the masses. It's properties and effects on society need to be further studied in the long-term before government helps to market it to the common man.
Reasons Why Bitcoins is Not Safe for General Investors:

  1. Bitcoin is easily stolen by sophisticated hackers or corrupt employees. The ability to recover said funds is nonexistent. Bitcoins can move across the world without a trace unlike a physical commodity which has many barriers to theft, such as the logistics of physically moving it, and compared to controlled digital assets such as stock shares which can be reversed. This is not a theoretical risk. Within the last year, Bitfinex, one of the largest exchanges, had 72 million stolen2. Even within the last few months another exchange lost 1.5 million3.
  2. Bitcoin network could split at any moment due to a contentious hard fork. The end result of this would be market confusion. This is not theoretical as it has happened before with another much smaller coin4. In fact, the risk of this occuring is increasing even more. At the time of this comment the network has 2 contentious proposals at 30% support. If either get 20% more support the network may split4.
  3. New threats are constantly being discovered. The primary issue is that Bitcoin is still too young that all of its properties are not known. Just within the last week another forking mechanism was thought of, which may cause unknown effects on the bitcoin network5.
  4. At any moment, there could could be a bug in the Bitcoin code that makes bitcoins worthless. A physical commodity does not have the risk of spontaneously disappearing or having its properties change, but with Bitcoin this could happen.
  5. The majority of the network is controlled by China via mining. China lacks rule of law. At any moment, Bitcoin could be attacked by miners in China at the coercion of the Chinese government. Or, even if China outlaws mining, it would cause all transactions on the blockchain to stop for potentially months.

Reasons Why Bitcoins is Not Safe for Society:

  1. Bitcoin is used to extort money out of people via ransomware7 and other attacks. Creating a larger market for it will only increase the supply of the crimes it allows.
  2. Bitcoin is being used to evade taxes. Expanding its market and network effect will only increase the ability of people to evade taxes8.
  3. Bitcoin is enabling new forms of dark markets and creates the means for commerce to take place among illegal goods9.

There are many reasons why Bitcoin is too immature to put in the portfolios of the common man and there are many reasons why Bitcoin and its effects on society need to be better understood before the government aids in the expansion of its market appeal. In addition, in the name of good governance, I think it would be irresponsible for an SEC commission that did not have all its members to rule positively on a highly controversial ETF that could have wide-ranging impacts on both individuals, society, and government as a whole. This is a decision that needs further study among various government departments to balance all concerns as Bitcoin has implications beyond merely a new asset class. It can fundamentally change the ability for governments to monitor criminal organizations.


Mike Johnson