Well done, you just described an exchange traded fund...
soo, thats just a parallel market with no use of the BTC involved and without the possibility of withdrawing?! im not sure whats the purpose here..
The WBT will probably act as a one way trapdoor for Bitcoins, driving up the value of remaining Bitcoins on the market. And that is a very, very good thing.
I would never trust such a legal monster. It's a paper market and once (if) established as a pricing mechanism for BTC, it may even present a nice attack surface for price manipulation.
If you don't have exclusive access to the key, you don't own it.
Price manipulation? How? An ETF established through a US Stock Exchange is an ETF, whether dividend paying stocks or Bitcoin. GLD is a super popular Gold ETF. If you own this ETF, gold bullion is stored for you in a vault in London. Not going to be much different owning this bitcoin ETF. Bitcoins will be stored for you somewhere.
Price manipulation, yes. Imagine that. There are even some famous examples, but it happens daily.
Hunt Brothers?
GATA?
Here's a quick primer from Forbes:
http://www.forbes.com/sites/greatspeculations/2010/07/23/gold-etfs-and-the-manipulation-game/