As things stand, the bitcoin ETF is widely considered to be the biggest news story in the cryptocurrency industry this year. We have recently seen a decision on the Direxion Investments ETF’s announced for some time in September, while Bitwise Asset Management has become the latest venture to go down the route of lodging a cryptocurrency ETF application with the US Securities and Exchange Commission (SEC).
The application that has caught the attention of the cryptocurrency industry though is that which was unveiled in June from VanEck and SolidX. Both ventures have had previous applications shut down by the SEC, and decided this time to join forces and submit what is increasingly looking like a successful bitcoin ETF.
In general, an ETF (exchange-traded fund) - is an instrument for a passive investment that allows to track bonds, indexes, commodities or assets. In practice, investors interested to trade their holdings together, join their funds and outsource it on professionals that manage the process for them. If accepted by the SEC, a Bitcoin ETF could similarly allow cryptocurrency enthusiasts to invest in the shared pool to be traded like a common stock on exchanges, without directly engaging in buying, trading, saving or safekeeping it.
While the community is understandably enthusiastic about this situation, the one question that no one seems to be asking is, what really happens next?
What happens after a decision is made?
If, as most seem to believe, the VanEck and SolidX application meets with official approval sometime this year, it’s expected that we’re going to see a rush of fresh investment, which will signal the opening of the floodgates to what will undoubtedly be widespread exposure to bitcoin and cryptocurrency at a level never before seen.
This is both a good thing and a bad thing.
Obviously, increased interest and investment in the crypto space can only be a really good thing for all concerned. This is what we in the industry have been striving for, after all. However, along with the deluge of investment comes added responsibility in the form of ensuring people and investment companies aren’t putting their funds at risk.
Regulation and compliance
Long considered to be in direct contrast to the very building blocks that the cryptocurrency industry has been built on, regulation is seen by many as the work of the devil, so to speak.
Is it really, though?
In an industry that sees billions of dollars traded on a daily basis, can we really see widespread acceptance and use without some form of official regulation to protect those who invest their money? We’ve already seen such steps taken in the securities industry, helping to stamp out fraud and thus creating a safer environment for the public. The truth is, some form of regulation may be required, and there are already digital currency startups who have taken the lead in this regard.
Regulation within the industry already
Although there is no official governmental regulation in place for the cryptocurrency space, we have seen a small number of startups look to implement self-regulation in an attempt to appeal to “traditional investors” who are undoubtedly more at ease working with a venture that shares some of the familiar rules and regulations that we see in the traditional finance arena.
Many times those startups are headed up by individuals or groups who have experience in the traditional financial industry. One such company is London-based Archax, headed by Graham Rodford, a qualified accountant and former COO at a billion dollar hedge fund in London.
Archax calls itself a “new institutional-grade exchange,” that is “built for institutions and run in a regulated manner with them in mind,” which embodies the idea of a regulated digital currency exchange.
While Archax still seems to be in the preliminary stages of launching, they have a pretty detailed whitepaper available on their site.
Another company who have been making some waves lately is ETERBASE, self-described as “Europes Premier Digital Asset Exchange.”
Again, much like Archax, ETERBASE is headed by a person with substantial experience within the traditional finance world: Robert Auxt, who was a member of the supervisory board of the European Investment Fund in Slovakia. At this stage, ETERBASE is pre-listing and assessing applications from projects that wish to participate, but both of these startups are taking the lead as far as regulation and compliance go.
If the ETFs brought forward, by VanEck and SolidX in particular, are given the green light, we may see more movement officially as far as regulation goes.
Considering the boost that a favorable ETF decision would give to the cryptocurrency industry, regulation is a small price to pay I think, and a step that will have to be taken sooner or later.
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