Coinbase Looks to Wall Street for Possible Cryptocurrency ETF
Coinbase is considering creating a cryptocurrency exchange-traded fund (ETF) and has contacted Wall Street investment firm BlackRock for advice, according to a report from Business Insider. But with the U.S. Securities and Exchange Commission (SEC) on a crypto ETF rejection spree, the chances of approval anytime soon seem low.
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Coinbase Phones Wall Street for Assistance
Citing unnamed sources, Business Insider’s Frank Chaparro reported today that Coinbase had contacted BlackRock for advice on how to go about creating a crypto ETF for retail investors. In July, the Financial News reported on the existence of a crypto/blockchain working group within BlackRock, the New York-based investment giant who manages the popular iShares line of ETFs.
A crypto ETF would be a retail-friendly version of the Coinbase Index Fund, which the company launched in March and is made up of Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic. But its requirement that only accredited U.S. investors may participate with a minimum investment of $250,000 USD means that it has only a limited market. Which is why Coinbase, among many others, are seeking a crypto ETF that could be bought by a much larger investment pool.
Long Odds of Crypto ETF
Despite the report, the chances of getting such an ETF approved by the U.S. SEC have never looked worse. On August 22nd, SEC staff rejected nine applications for bitcoin ETF from ProShares, Direxion and GraniteShares, citing the proposals’ lack of protections for “fraudulent and manipulative acts and practices.”
Commissioners from the SEC are reviewing the decision, but if the fate of the bitcoin ETF supported by Cameron and Tyler Winklevoss is any example, the odds are not good. In July, the SEC commissioners confirmed the March rejection of their Bats BZX ETF by a vote of 3-1.
However, that hasn’t stopped other firms from attempting to get approval for a crypto ETF. In July, Bitwise Asset Management filed with the SEC for a crypto ETF that would be an index of the 10 largest cryptocurrencies. In August, the SEC said it would be delaying a decision on another proposal from VanEck and SolidX until September 30th.
Crypto Market Reflecting Bad News from Goldman Sachs
Bitcoin (BTC) has fallen nearly eight percent in the past 24 hours to $6,470 USD, with ether (ETH) off around 11 percent and sitting at $226 USD. Most other altcoins are off five to ten percent, though Ripple (XRP) has only dropped four percent. Bitcoin’s percentage of the market cap, or dominance, stands at 54.7 percent, which has surpassed the highs of August to again be at its highest level since December 2017.
The sharp downward price movement in crypto markets came after news broke September 5th that Goldman Sachs was postponing plans for a bitcoin trading desk. Reports that the blue-chip investment bank was planning to trade bitcoin futures on clients’ behalf and develop non-deliverable forward bitcoin contract products came in May.
Crypto market movements in 2018 seem to indicate that crypto investors are pinning their hopes on the adoption of cryptocurrencies by the traditional financial industry. A crypto ETF would be the epitome of this. Yet, acceptance has proven difficult, though some have pointed to the shakeout of weaker altcoins and the relative price stability of some leading coins, such as bitcoin since April, as a sign of the maturation of the crypto markets.
Have your say. Does Coinbase have a better chance at getting a crypto ETF approved by the SEC? Or will they face the same obstacles as other companies?
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