July 11, 2018
Dear Sir or Madam,
I am not a citizen of the US, but as a studied economist still would like to comment on the Cboe BZX Rulemaking (File No. SR-CboeBZX-2018-040) regarding the proposed bitcoin ETF.
bitcoin still has a rather negative image in the public - being used by cyber criminals, on dark web marketplaces and as a purely speculative investment. But that is only a tiny part of the entire truth about bitcoin. bitcoin also seems to be the natural evolution of money and makes a perfect fit for our digitalized and globalized world. While we can send information around the globe in seconds without even thinking about it (like this e-mail), the transfer of money takes days and comes at a significant cost.
bitcoin has the potential to connect our digital and global economies. Besides that, bitcoin also makes a great store of value, since its total supply is transparent and cannot be changed. While gold has traditionally been used as a medium of exchange and today as a store of value, bitcoin is set to take its place in our digital world. Last but not least, because of its digital nature, price movements as well as transactions can be tracked in realtime globally, adding to the transparency of bitcoin.
So why would a bitcoin ETF make sense? Dealing with bitcoin today is still burdensome: finding and setting up a secure wallet, using private keys and complex public addresses, which change with every transaction in the case of hierarchical deterministic wallets. Not to speak of countless hacker attacks against bitcoin users. While proficient computer users might be able to use bitcoin safelly, average users likely are not as of today. Also for financial institutions those technical hurdles mean that more expertise is needed inhouse, adding to the overall IT costs and complexity.
A bitcoin ETF would give financial institutions the ability to deal with promising cryptocurrencies like bitcoin while being able to use a well known and understood vehicle to do so and to rely on the fact that their counterparties are well regulated. This way investors also would benefit, since financial institutions would be able to invest their money into bitcoin in a regulated and technically safe manner. Onboarding institutional investors should further stabilize the bitcoin market through a significant rise in trading volume.
Last but not least, an SEC approved bitcoin ETF might help secure the leading position of the US in this market, since ETFs are being launched globally like in the EU (Netherlands) as of current. Ignoring the global cryptocurrency developments on the other hand from a regulatory standpoint will neither make them go away nor protect investors and users in a meaningful way.
Yours sincerely,
Daniel Richey,
Germany