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Zach Fallon, Matt Newton, on SEC Delays

Zach Fallon, a former SEC lawyer, Principal at blockchain legal firm Blakemore Fallon & Co-founder of Ketsal Consulting, describes how proponents of the CBOE BZK took action to address SEC concerns in the wake of the Winklevoss ETF denial.

“While the SEC’s notice of designation of additional time before deciding on the Cboe BZX’s proposed rule change is generally consistent with its measured approach to the digital asset market, there are some differences between this action and last week’s regarding shares of the Winklevoss Bitcoin Trust.

For one, it’s clear that proponents of the VanEck product took notice of the Winklevoss denial and attempted to quickly and meticulously address the SEC concerns. According to the record, proponents of the rule met with SEC officials last week to make their case in person as to why the proposed rule should be approved. Notable, among other things, was their suggestion that “the initial share price will be set at a level designed to ensure that only institutional and ‘non-retail’ investors will be able to purchase shares” at an approximate price of $200K per share. This will likely address some of the concerns expressed in last week’s denial, particularly where the SEC noted the difference in regulatory oversight and market participation by institutional and retail investors in markets that the CFTC and SEC oversee.

Further, it’s interesting that the SEC noted in the release the number of comments received on the proposed rule change (over 1,300). In sum, I think this shows the value of regulatory engagement by market participants.”

Matthew Newton, market analyst at eToro, the world’s leading social trading platform, explains how today’s delay of the bitcoin ETF decision could impact markets.

“A green light for the bitcoin ETF would fire the starting gun on a race among institutional investors to cash-in on this new product. The market is therefore rightly frustrated by the delay to the decision.

But there is something bigger at stake. The lingering question mark for the SEC is around bitcoin custody. To approve the decision, they’d need to do so in the knowledge that the ETF was backed by physical bitcoin – either stored by the CBOE or a third party.

Sooner rather than later, these incumbents will either have to decide whether to develop their own storage capabilities in-house, or place their trust in crypto institutions. We could even start to see consolidation in the market with heavyweight finance houses acquiring crypto companies. Goldman Sachs has already begun deliberations over custody, so watch this space.

Along with regulatory oversight, this question of custody will determine the next big move in the market.”

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