Subject: File Number SR-CboeBZX-2018-040
From: Mark Szyszkowski
Affiliation:

Jul. 26, 2018

I believe the SEC should not consider an ETF for Bitcoin at this time. To date the SEC and CFTC have not formally labeled Bitcoin as a commodity or a currency. The SEC has stated that Bitcoin is not a security, and sees it as a commodity, but the true nature is still a digital asset, a virtual currency based on code, which at this time does not have any classification in SEC, CFTC, or FINRA, definitions or regulations. Furthermore, broker/dealers have no formal education or licensing on Bitcoin, any virtual currency, or any digital asset class, that would be a requirement under a Series 7. While the proposed ETF, bases its application on Bitcoin being a commodity, there is no current applicable definition as to whether Bitcoin is a medium of exchange, a store of value, or both?
Where is the intrinsic value derived from? What is the backing of Bitcoin? What is the definition of purely cyber infrastructure? Who runs it? How is expansion allocated and its technology upgraded? What inherent technological security risks does it have? Is it considered a “Cryptocurrency”, and if so, where are the current regulations from either the SEC, CFTC, or even The Federal Reserve for that matter, on “Cryptocurrency”, whether it be a security, a commodity, or a currency that functions like fiat? ls language, regulations, and compliance needed to define a new asset class? How does one define an asset that has no physical representation, such as gold, silver, or oil? These are many of the questions that the governing bodies have not answered as of yet, nor have most countries, as they seek guidance from US authorities on this significant and historic juncture in the digital ecosystem. If these many questions have yet to be answered, and definitions applied, how can approval for an ETF be granted? Christopher Giancarlo said, “The CFTC believes that the responsible regulatory response to virtual currencies must start with consumer education.” What is the proposed compliance to educate, not only the retail investors, but institutional investors? The very purpose of the SEC is to protect investors. If and ETF is passed, this creates the same current market volatility, only a larger scale. The environment is ripe for a pump and dump scheme, which is the hopes of the mostly retail investors, looking to capitalize on the once exponential growth of Bitcoin. Many invested during the rise and apex of Bitcoin, in 2017, only to see it come crashing down, after a much more expected climb to 100K or more. Since then, we have experienced short bull rallies, that were evidenced by market manipulation, to intentionally drive the price. There is also a faction of ideologues, that believe if the price is driven to monumental heights, that it will become the mainstream replacement for fiat, and topple the institution of banking as we know it. This scenario could not be further from the truth. If the SEC looks at the level of appropriation that Bitcoin has taken globally, it would see that there is no widespread call or mandate for its adoption. Additionally, in the world “Blockchain”, Bitcoin’s technology is already archaic, with scalability issues, and no global use case, based on its small and slow transaction ability. In the long-term investment strategy of typical financial instruments, Bitcoin is simply an introductory technological advancement, similar to what AOL was to the internet.
On a final point, I would like to address the regulation of “Best Interest”. What is to prevent brokers (with no current formal education on “Blockchain”, “Cryptocurrency”, or “Digital Assets”) from telling their clients that this is the future? Perhaps, this is going to be bigger than Amazon and Apple!? Get in now, before it goes to 100K, or 500K, or even some wild speculations of 1 million per coin? The potential for brokers to push a digital asset, that in a single day, can trade higher than the best performing stocks do in a month, which would net the fund significant profits, as well as substantial commissions to the brokers, makes for an easy violation of the “Best Interest” regulation. The reactionary volatility to the cryptocurrency market, could indeed drive prices, as many have suggested, and hope for, by your approval of an ETF, but can equally crash the price, as we have seen before. Simply stated, the SEC, CFTC, FINRA, The Federal Reserve, and Congress, has yet to endorse and approve a regulatory framework that encompasses “Cryptocurrency”. Based on past and current actions by the governing authorities, more time is required to do it due diligence, and write the appropriate regulations around a new asset class for investor protection.

Kind regards,
Mark Szyszkowski
Co-founder
www.CCRCP.org