July 12, 2018
Dear SEC People,
I hope you are doing well. I originally intended to submit a comment and reasoning regarding allowing the said Bitcoin ETF. But I realise while typing my response that it would be a mistake. It is my hope that this message will automatically be included in future revisions of this proposed amendment or related amendments sought by new parties.
Allowing BTC or any cryptocurrency ETF serves only one primary goal, to get pension funds involved. Rich investors, most of silicon valley and ordinary public (as witnessed by multiple ICO scams and January crash) is already invested, is aware of ways to invest and keenly follows development in this area. As evident through various message boards. Even people who do not understand technology and its pitfalls or potential have invested through various broker platforms. Some of which are non custodial and are purely speculation based. The various advertisements, both online and offline and investment commitments through private funds is a clear signal that a lot of money has already moved into this space.
While the potential of blockchain technology and cryptocurrencies like Bitcoin and Ethereum is debatable, there propensity to create bubbles and ponzi like schemes is quite glaring. There had been many ponzi games run on Ethereum and earlier on Bitcoin as well. Some Google search can provide the relevant links. The space is rife with speculators.
It may be possible that Bitcoin and Ethereum keep on gaining momentum and keep on maturing as platforms. They definitely solve real world problems. And have ecosystem of their own. Same comment for any such platform.
But SEC's purpose it to protect investors. In that regards and with the knowledge that Bitcoin Futures, CBTC are already listed and the fact that cryptocurrencies are electronic in nature, SEC should start applying breaks and put this sector under scrutiny and scanner even if that causes upheaval in the short term. I do ask this question that why do we need ETFs in this space at all? With all cryptocurrencies being entirely electronic, idea of ETF is absurd. Why not simply allow buying of BTC, ETH etc instead of some ETF? (don't do either)
There's a chance that some ground breaking technological feats will be achieved in this space. Considering the global and non permissioned nature of cryptocurrencies, lots of money will naturally flow into space as well. Also Bitcoin, Ethereum etc are great hedge against bad monetary policies (Venezuela, Zimbabwe). But none of that justifies allowing an ETF in this space. Pension Funds money should stay out of this space if that seems like the worst move. Many countries are already investing (Swiss exchanges, Korean state) and consider crypto as an emerging class. It may seem like FOMO (I wanted to avoid this word!) for US funds but considering their size and reach, that's good for everyone.
Let technology prove itself and slowly make legitimate claims as justified by policy amendments. The space is in infancy. There are some private funds that have floated ERC20 tokens and will soon seek compliant trading. All that is fine and understandable. These funds are transparent in terms of capital raised and ownership structure. They can be directed by law to only invest into incorporated businesses. They can also report NAV (some of them do), to give some guidance about their activity and exposure. But a purely BTC or cryptocurrency fund would be an aberration at this stage
Lastly, your website can do a makeover. It took me forever to find way to comment online (although I did read the previous comments).
I know all emails will be published online. So I must mention cryptokitties!
Have a good day
Sincerely,
Mohit Aggarwal