Bitwise Asset Management has become the latest U.S. financial firm to seek regulatory permission from the Securities and Exchange Commission (SEC) for launching a Bitcoin exchange-traded fund (ETF). On January 10, 2019, the company announced it had filed an initial registration statement for a proposed physically held Bitcoin ETF, claiming a novel structure that could overcome previous SEC objections.
Innovative Model: Regulated Custody and Multi-Exchange Pricing
Bitwise stated that its ETF will rely on regulated third-party custodians to hold the physical Bitcoin, a standard practice under U.S. fund regulations for the past 80 years. Additionally, the ETF's pricing will be derived from multiple cryptocurrency exchanges that represent the majority of verifiable trading volume. The company dedicated 2018 to researching the SEC’s concerns regarding the crypto market, including trading ecosystem quality, pricing reliability, arbitrage robustness, and custody safety.
John Hyland, Bitwise's Global Head of Exchange-Traded Funds, commented: “We believe the crypto trading ecosystem has evolved in significant ways in the past year. Having a regulated bank or trust company hold physical assets of a fund has been the standard under U.S. fund regulation for the last 80 years, and we believe that is now possible with Bitcoin.”
Planned Listing on NYSE Arca
According to Bitwise, the proposed listing exchange NYSE Arca will file a Rule 19b-4 request with the SEC in the coming days, seeking necessary rule changes to allow the ETF to list once the registration statement is declared effective. The ticker symbol will be determined later. Hyland added: “While there can be no assurance that the 19b-4 application will be granted or the SEC will review and ultimately accelerate the registration statement, we are optimistic that 2019 should be the year that a Bitcoin ETF launches.”
Previous attempts to launch a Bitcoin ETF were rejected by the SEC, citing concerns over market manipulation, lack of liquidity, and custody risks. Bitwise’s filing is seen as a key test of the SEC’s evolving stance. Analysts believe approval could open the door for institutional capital and prompt other financial firms to follow suit. The SEC has not yet commented on the filing. Market participants now await NYSE Arca’s formal 19b-4 submission, which will trigger the SEC’s review process. The outcome will likely depend on whether the SEC views current market infrastructure improvements as sufficient to address past concerns.