Topic: Buy bitcoins on Nasdaq - page 3. (Read 13736 times)
Thanks. That's kind of depressing. It seems like the USA is just attempting to kill Bitcoin with as little effort as possible. They should at least give us a fighting chance to succeed or fail on the merits of the design.
@DnT
That is a really succinct and easily understandable explanation of the state of regulatory affairs for FinCEN. I followed the thread where you detailed your letter to them but I think your explanation here does a better job of summing up the situation. Thanks!
That is a really succinct and easily understandable explanation of the state of regulatory affairs for FinCEN. I followed the thread where you detailed your letter to them but I think your explanation here does a better job of summing up the situation. Thanks!
The point of BTC is to be unregulated, the point of the SEC is to regulate... although the ETF would be more legit than 95% of the OTC stocks out there, I can't see the SEC approving an ETF that cannot be regulated.
The same can be said for gold.
I understand the comparisons of BTC to gold, however, I don't think the SEC is going to see that comparison.
Furthermore, there is a precedent established with the exchange and value of precious metals that goes back long before the US Dollar was thought of... there is no precedent set for virtual coins on the NYSE. (Edit: DnT explained it much better above
)Unless ummm... Facebook and Zynga credits, but those are only purchased with USD and cannot be withdrawn from the account.
@DnT
You mentioned that different agencies will likely define Bitcoin in different ways and I agree with you. What do you think the correct definition, or should I say most favorable definition, of Bitcoin is and do you see a way of presenting that definition to different departments (like a letter campaign) to help speed along the correct legal perception of Bitcoin?
You mentioned that different agencies will likely define Bitcoin in different ways and I agree with you. What do you think the correct definition, or should I say most favorable definition, of Bitcoin is and do you see a way of presenting that definition to different departments (like a letter campaign) to help speed along the correct legal perception of Bitcoin?
Well that is complicated and I don't want to derail this thread. The issue with FinCEN is that they took the easy way out and as a result created a regulatory mess. Which of these doesn't fit.
Company trades Bullion for USD or USD for Bullion. Buyer <---> Company
Company trades EUR for USD or USD for EUR. Buyer <----> Company
Company trades BTC for USD or USD for BTC. Buyer <----> Company
Company takes USD (or other monetary value) from Party A and at Party A direction delivers the USD (or other monetary value) to Party B. Party A----> Company ----> Party B
All these are regulated activities but the first two are NOT money transmitters. The first is Bullion Dealer and the second is a dealer in foreign exchange. The lack of MT classification is great for these industries because MT is the most byzantine mess of conflicting state and federal regs. The last example is a the classic Money Transmitter (think Western Union). It is important to realize that generally speaking "payments" are not money transmission. If your employer gives you a paycheck (or ACH) that is not money transmission. If you use a bank wire to pay a bullion dealer who ships you some gold that is not money transmission. If you make monthly contributions to your IRA by ACH withdrawal from your checking account to your brokerage account that is not money transmission.
Generally speaking money tranmission involves (not lawyer terms) "moving someone ELSES money". If your employer uses a payroll company and provides funds and instructions (pay QA $10,000 monthly into this account) the Payroll company is a money transmitter. If you take $500 cash to Western Union and "send" (although your money never moves) it to your friend in Virginia who picks it up at a WU location that is money transmission. The $500 isn't WU it is yours, WU is just moving it for you.
Now look at the BTC example above. I would argue trading/exchanging BTC for USD has more in common with trading/exchanging Gold for USD or trading/exchanging EUR for USD. FinCEN however couldn't make it "fit" in those classifications. Bullion dealers specifically name precious metals and Dealers in Foreign currency specifically define "foreign currency".
The only category that could possibly fit, in the sense of round peg and square hole but we have this sledgehammer is Money Transmitter. Of course that opens up a nightmarish world of bureaucracy at the state level. Honestly there is no worse classification. It is cheaper and faster to form a new credit union (or buy an existing failing one) then becomes registered as MT in all states.
So I guess I answered what it shouldn't be. The reality is no existing MSB laws properly cover what Bitcoin is. In an optimal world regulators would have gone to congress and asked them to expand the scope of their authority to cover virtual currencies. FinCEN then could either have expanded the "Dealer in Foreign Currency" category to also cover virtual currencies, "Dealer in Currency" or created an entirely new category (there are 6 classes of MSB, no reason it couldn't be 7).
For the record this is the approach that regulators in Canada have taken. They indicated that no existing MSB regs cover Bitcoin brokers/traders/exchanges. This isn't to say they don't see the new for regulation but rather the existing regs don't cover it and new regs will need to be written.
The point of BTC is to be unregulated, the point of the SEC is to regulate... although the ETF would be more legit than 95% of the OTC stocks out there, I can't see the SEC approving an ETF that cannot be regulated.
The same can be said for gold.
Why I don't think it will be approved...
From the S-1:
The point of BTC is to be unregulated, the point of the SEC is to regulate... although the ETF would be more legit than 95% of the OTC stocks out there, I can't see the SEC approving an ETF that cannot be regulated.
From the S-1:
Quote
Risk Factors Related to the Regulation of the Trust and the Shares
The tax rules applicable to the Shares and the underlying Bitcoins held by the Trust are complex, and no statutory, judicial, or administrative authority directly addresses the characterization of an investment in Bitcoins. The tax consequences to an investor of an investment in the Shares could differ from the investor’s expectations. US Shareholders should refer to the section “United States Federal Income Tax Consequences” for more information.
Regulatory changes or actions may alter the nature of an investment in the Shares or restrict the use of Bitcoins or the operation of the Bitcoin Network in a manner that adversely affects an investment in the Shares.
Until recently, little or no regulatory attention has been directed toward Bitcoins and the Bitcoin Network by US federal and state governments, foreign governments and self-regulatory agencies. As Bitcoins have grown in popularity and in market size, certain US agencies (e.g., FinCEN) have begun to examine the operations of the Bitcoin Network, Bitcoin users and the Bitcoin Exchange Market. There is a possibility of future regulatory change altering, perhaps to a material extent, the nature of an investment in the Shares or the ability of the Trust to continue to operate.
Currently, neither the SEC nor the CFTC has formally asserted regulatory authority over the Bitcoin Network or Bitcoin trading and ownership. To the extent that Bitcoins are determined to be a security, commodity future or other regulated asset, or to the extent that a US or foreign government or quasi-governmental agency exerts regulatory authority over the Bitcoin Network or Bitcoin trading and ownership, trading or ownership in Bitcoins or the Shares may be adversely affected.
The tax rules applicable to the Shares and the underlying Bitcoins held by the Trust are complex, and no statutory, judicial, or administrative authority directly addresses the characterization of an investment in Bitcoins. The tax consequences to an investor of an investment in the Shares could differ from the investor’s expectations. US Shareholders should refer to the section “United States Federal Income Tax Consequences” for more information.
Regulatory changes or actions may alter the nature of an investment in the Shares or restrict the use of Bitcoins or the operation of the Bitcoin Network in a manner that adversely affects an investment in the Shares.
Until recently, little or no regulatory attention has been directed toward Bitcoins and the Bitcoin Network by US federal and state governments, foreign governments and self-regulatory agencies. As Bitcoins have grown in popularity and in market size, certain US agencies (e.g., FinCEN) have begun to examine the operations of the Bitcoin Network, Bitcoin users and the Bitcoin Exchange Market. There is a possibility of future regulatory change altering, perhaps to a material extent, the nature of an investment in the Shares or the ability of the Trust to continue to operate.
Currently, neither the SEC nor the CFTC has formally asserted regulatory authority over the Bitcoin Network or Bitcoin trading and ownership. To the extent that Bitcoins are determined to be a security, commodity future or other regulated asset, or to the extent that a US or foreign government or quasi-governmental agency exerts regulatory authority over the Bitcoin Network or Bitcoin trading and ownership, trading or ownership in Bitcoins or the Shares may be adversely affected.
The point of BTC is to be unregulated, the point of the SEC is to regulate... although the ETF would be more legit than 95% of the OTC stocks out there, I can't see the SEC approving an ETF that cannot be regulated.
As an NYSE trader, I would definitely be buying some shares of the ETF. For some reason I just don't think it will get approved.
I fear you may be right. Now I think a Bitcoin (or some future CC) ETF is an inevitability but I don't know if it will be this ETF at this time. While structurally it is very similar to any physical commodity ETF the concept of a "virtual asset" is a huge jump for regulators (who generally are non-creative old men).
It may take a decade of failed attempts before one gets approved. Then again lets hope they have friends in the right places. I know if I (as a wallstreet outsider) tried to launch a fund like this the chance of approval would be 0.0%.
This article posted today, said that their initial investment was $11M but it is worth around "Oops, that’s about $8-million now." today.
So, at $8,000,000 by today's price (~$86 at time of article) we are looking at under 100,000 BTC.
So, at $8,000,000 by today's price (~$86 at time of article) we are looking at under 100,000 BTC.
I believe that article is misquoting another article to a flawed conclusion. In an interview the twins made a reference to purchasing there coins in the summer of 2012 and owned 1% of all Bitcoins. I assume that meant 1% of coins minted to date (~11M) not all 21M coins but either way if the bought in summer of 2012 neither sum required an investment of $11M USD. I don't believe they have ever indicated their actual purchase price but the exchange rate in Summer of 2012 ranged from ~$5 to ~$10 per BTC.
The author mixes up the value of an investment and the amount invested. At the time of the New York Times article, their holdings were reportedly WORTH $11M (110K BTC @ $100 ea?). If we assume they didn't increase or liquidate their holdings it is worth less today then at the peak but it would still be up 800% or so in roughly a year. I would say that is "not too bad".
Still the S-1 simply indicates the trust will have 200K BTC, issue 1 million shares (0.2 BTC initial NAV), and pre-IPO shares will be issued in baskets of 50,000 shares (10,000 BTC). It is unclear what will fund the initial share sales. The W twins might be using their 110,000 BTC, they might have more bought for this purpose, or they may be looking solely for outside capital to acquire BTC. We may never know unless they decide to tell us.
Now, let' s start again and I will try to be more accurate in the asking. Are the Winklevoss twins attempting to recover their money from creating a fund because if they sell a bunch of Bitcoins at a time they will crash the price or are they doing this because they really love Bitcoin and ultimately want it to succeed? Is this like a hedge against their investment?
No offense intended I honestly didn't know what you were asking but it is a good question and one other people have asked in a variety of ways.
My guess (and this is just my guess) they are doing this to profit. If they simply wanted to unload 100K BTC they could do so much easier, cheaper, and quicker then then the huge regulatory expense of starting an ETF. First is that regulators may simply not approve this ETF or they may require lots of back and forth and modification of the proposed financial insturment. Second they need to find an exchange to list it and it is possible no exchange will or their first choice will decline (after some months of underwritting) and they need to shop it to a second or third or fourth exchange.
Lastly 100K BTC is really not that much. This is a very slow process. We are talking 3-4 months at least and possibly much longer given the novel first of its kind nature. Lets say it takes them four months though. That is 120 days. If they wanted to unload that on MtGox that would only require selling 833 BTC a day for the next four months.
Once again simply my opinion but I see the motivation as:
a) if Bitcoin becomes very big someday and the ETF is popular they will have first mover status. They will be the GLD of Bitcoins and that is a license to print money.
b) it provides liquidity on a scale that MtGox simply can't handle. A VC fund would be far more comfortable dealing in "paper Bitcoins" on the NASDAQ then wiring $10M to the Magic The Gathering Online exchange in Japan.
c) it is potentially bullish for Bitcoin in general and Bitcoin related enterprises. The whole a rising tide lifts all ships. They can profit indirectly in addition to the direct profits.
d) for better or worse their names are now tied to Bitcoin. Don't underestimate egos. If this thing hits big people on Wallstreet will remember who launched it, who bought coins when most people hadn't heard of Bitcoin, who "got it right" and laughed all the way to the wallet.dat.
Once again I caution this is just my speculation but it seems illogical they would go through all this simply to unload some coins.
Thank you that's a great explanation and I can now see that they are gambling their fate and rep on Bitcoin but if it pays off it pays off big. I never thought of it that way.
No offense taken. I trade Bitcoins at MtGox and BTCe and have made some money doing it but have no problem admitting that I'm a two year old Bitcoin noob and I've been very lucky so far. But I'm learning!
Can you answer my question from earlier in this thread. You probably missed it. Thanks.
d) for better or worse their names are now tied to Bitcoin. Don't underestimate egos. If this thing hits big people on Wallstreet will remember who launched it, who bought coins when most people hadn't heard of Bitcoin, who "got it right" and laughed all the way to the wallet.dat.
Once again I caution this is just my speculation but it seems illogical they would go through all this simply to unload some coins.
That's an interesting side of it I never thought of... what a great way for them to be seen as the "guys who mainstreamed Bitcoin" and not "the crybabies who sued Facebook"
Yeah I think it is a lesser consideration but it is important to remember people are people not wealth accumulating robots. Motivations often have a very human element to it.
As an NYSE trader, I would definitely be buying some shares of the ETF. For some reason I just don't think it will get approved.
Hopefully I am wrong!
d) for better or worse their names are now tied to Bitcoin. Don't underestimate egos. If this thing hits big people on Wallstreet will remember who launched it, who bought coins when most people hadn't heard of Bitcoin, who "got it right" and laughed all the way to the wallet.dat.
Once again I caution this is just my speculation but it seems illogical they would go through all this simply to unload some coins.
That's an interesting side of it I never thought of... what a great way for them to be seen as the "guys who mainstreamed Bitcoin" and not "the crybabies who sued Facebook"
Yeah I think it is a lesser consideration but it is important to remember people are people not wealth accumulating robots. Motivations often have a very human element to it.
d) for better or worse their names are now tied to Bitcoin. Don't underestimate egos. If this thing hits big people on Wallstreet will remember who launched it, who bought coins when most people hadn't heard of Bitcoin, who "got it right" and laughed all the way to the wallet.dat.
Once again I caution this is just my speculation but it seems illogical they would go through all this simply to unload some coins.
That's an interesting side of it I never thought of... what a great way for them to be seen as the "guys who mainstreamed Bitcoin" and not "the crybabies who sued Facebook"
Now, let' s start again and I will try to be more accurate in the asking. Are the Winklevoss twins attempting to recover their money from creating a fund because if they sell a bunch of Bitcoins at a time they will crash the price or are they doing this because they really love Bitcoin and ultimately want it to succeed? Is this like a hedge against their investment?
No offense intended I honestly didn't know what you were asking but it is a good question and one other people have asked in a variety of ways.
My guess (and this is just my guess) they are doing this to profit both directly from the fees generated by the ETF and indirectly by the benefit to Bitcoin in general. If they simply wanted to unload 100K BTC they could do so much easier, cheaper, and quicker then then the huge regulatory expense of starting an ETF.
The first reason is that regulators may simply not approve this ETF or they may require lots of back and forth and modification of the proposed financial insturment. Second is that even once approved they need to find an exchange to list it and it is possible no exchange will or their first choice will decline (after some wasted months of underwritting) and they need to shop it to a second or third or fourth exchange.
Lastly 100K BTC is really not that much. This is a very slow process. Remember we are moving at the speed of government mixed with risk averse accountants with the added bonus of lawyers dealing with something totally new (and thus hard to provide firm legal guidance). Honestly I would say 3-4 months is naively optimistic. There is a real possibility it will take much longer given the novel first of its kind nature however lets say it takes them four months though. That is 120 days. If they wanted to unload that on MtGox that would only require selling 833 BTC a day for the next four months.
Once again simply my opinion but I see the motivation for the ETF as:
a) if Bitcoin becomes very big someday and the ETF is popular they will have first mover status. They will be the GLD of Bitcoins and that is a license to print money. Hell I will use it and I own physical Bitcoins. Why? Because I can use tax exempt money in my IRA or 401K to buy Bitcoins without taking a penalty to withdraw it from the IRA/401K.
b) it provides liquidity/access on a scale that MtGox simply can't handle. A VC fund would be far more comfortable dealing in "paper Bitcoins" on the NASDAQ then wiring $10M to the Magic The Gathering Online exchange in Japan.
c) it is potentially bullish for Bitcoin in general and Bitcoin related enterprises. The whole a rising tide lifts all ships. They can profit indirectly in addition to the direct profits.
d) for better or worse their names are now tied to Bitcoin. Don't underestimate egos. If this thing hits big people on Wallstreet will remember who launched it, who bought coins when most people hadn't heard of Bitcoin, who "got it right" and laughed all the way to the wallet.dat. If Bitcoin has a great year in 2014 (or 2015, or 2029) say up 500% the fund would post gains up 500%. Imagine the news story and inverview on CNBC about the guys who brought you the best performing ETF on a year to date and 5 year basis.
Once again I caution this is just my opinion but it seems illogical they would go through all this simply to unload some coins.
From numbers, they actually own 200,000 bitcoins, seems that all their coins went into this IPO
This article posted today, said that their initial investment was $11M but it is worth around "Oops, that’s about $8-million now." today.
So, at $8,000,000 by today's price (~$86 at time of article) we are looking at under 100,000 BTC.
Still a buttload of coins!
Edit: http://www.theglobeandmail.com/report-on-business/top-business-stories/introducing-winklevoss-bitcoin-shares-if-you-cant-have-facebook/article12915664/
(Article I referenced)
...This whole thing is merely a way for the trust to "sell" its massive collection of bitcoins without any bitcoins actually trading hands...the trust doesn't make any money that it wouldn't make by simply selling its bitcoins the conventional way...
Funds of this type are designed to generate revenue via management fees. The sponsor's fees and trust expenses are covered by the Bitcoins held in the trust itself. Thus the gradually decreasing net asset value (understood in BTC per share) cited in the filing, pp. 40-41; the same gradual process of NAV erosion also occurs in other commodity ETFs such as precious metal funds, etc.
So do you feel this is just a way for them to recover their money in a highly illiquid market? They could never sell enough Bitcoins to recover their investment so they create a fund?
What are you talking about? ETFs make money from management fees. All ETFs make money from management fees. It is the entire profit motive for running an ETF. GLD for example has $38 billion and collects 0.4% in fees on that annually. $38B * 0.4% = $150M annually. Obviously this ETF is smaller but all ETF start small and has the potential to be much larger.
That's what I'm asking DnT. First, let's pretend that not everyone that shows up at this forum is a Wall Street investor. Second, let's pretend that occasionally people ask questions here not because their trolling but to gain knowledge from people that can explain what's going on.
Now, let' s start again and I will try to be more accurate in the asking. Are the Winklevoss twins attempting to recover their money from creating a fund because if they sell a bunch of Bitcoins at a time they will crash the price or are they doing this because they really love Bitcoin and ultimately want it to succeed? Is this like a hedge against their investment?
And for every additional 50K units the trust issues, it has to buy 10K BTC on the open market. Once this works, resulting demand for BTC will be absolutely unimaginable for anyone involved in BTC trading right now.
where does it say that they have to keep buying BTC in the open market?
They don't have to but institutional investors will exploit it for arbitrage. Say demand exceeds supply and while 1 share = 0.2 BTC the price rises above NAV and is trading at say 0.22 BTC per share (in USD equivelent). An institutional investor would short 50,000 shares and deliver 10,000 BTC to the trustee. The trustee would then add the 10,000 BTC to the trust, issue 50,000 new shares. The investor then uses the new shares to cover the short and pockets 0.02 BTC per share * 50,000 = 100 BTC in a 0 risk arbitrage.
IT doesn't matter who buys the underlying asset, someone will if demand for the ETF shares exceeds supply. This isn't a new concept. For example physical bullion trusts have existed for over a decade. The best known one is GLD. The trust proposed by the W twins is functionally identical to GLD except the underlying asset is Bitcoins not Gold Bullion.
...This whole thing is merely a way for the trust to "sell" its massive collection of bitcoins without any bitcoins actually trading hands...the trust doesn't make any money that it wouldn't make by simply selling its bitcoins the conventional way...
Funds of this type are designed to generate revenue via management fees. The sponsor's fees and trust expenses are covered by the Bitcoins held in the trust itself. Thus the gradually decreasing net asset value (understood in BTC per share) cited in the filing, pp. 40-41; the same gradual process of NAV erosion also occurs in other commodity ETFs such as precious metal funds, etc.
So do you feel this is just a way for them to recover their money in a highly illiquid market? They could never sell enough Bitcoins to recover their investment so they create a fund?
What are you talking about? ETFs make money from management fees. All ETFs make money from management fees. It is the entire profit motive for running an ETF. GLD for example has $38 billion and collects 0.4% in fees on that annually. $38B * 0.4% = $150M annually. Obviously this ETF is smaller but all ETF start small and has the potential to be much larger.
And for every additional 50K units the trust issues, it has to buy 10K BTC on the open market. Once this works, resulting demand for BTC will be absolutely unimaginable for anyone involved in BTC trading right now.
where does it say that they have to keep buying BTC in the open market?
...This whole thing is merely a way for the trust to "sell" its massive collection of bitcoins without any bitcoins actually trading hands...the trust doesn't make any money that it wouldn't make by simply selling its bitcoins the conventional way...
Funds of this type are designed to generate revenue via management fees. The sponsor's fees and trust expenses are covered by the Bitcoins held in the trust itself. Thus the gradually decreasing net asset value (understood in BTC per share) cited in the filing, pp. 40-41; the same gradual process of NAV erosion also occurs in other commodity ETFs such as precious metal funds, etc.
So do you feel this is just a way for them to recover their money in a highly illiquid market? They could never sell enough Bitcoins to recover their investment so they create a fund?
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