Cameron and Tyler Winklevoss, the brothers who first gained notoriety for their claimed involvement with Facebook, have filed paperwork with regulators to market a bitcoin ETF, hoping to put a low-cost, tradable ETF wrapper around the “cryptocurrency” for the first time.
Bitcoin, the end-user-to-end-user digital money that emerged in 2008, is a digital currency that’s not managed by any central bank or authority, and can be transferred through a computer or even a smartphone without the involvement of any banks. While it’s not a mainstream currency, it’s accepted in trade in many parts of the world.
Still, bitcoin trading is primarily the turf of computer programmers and tech-savvy investors who understand the risks associated with a currency that’s volatile due to its “relative lack of acceptance,” as the prospectus points out. The Winklevoss brothers are hoping the bitcoin ETF will change that, and legitimize the currency by making exposure to it accessible to just about any investor willing to take on the risk.
"Investors who are seeking diversification away from the dollar, most notably those that have traditionally looked at hard assets such as gold, would find this interesting," IndexUniverse ETF Analyst Ugo Egbunike said.
"Regulatory risks aside, investors will need to consider the historical levels of volatility that we've already witnessed in the bitcoin market," he added.
It’s unclear whether the Securities and Exchange Commission will OK the idea, but having Kathleen Moriarty’s signature on the filing might help it.
A bitcoin ETF certainly faces challenges not only in the underlying bitcoin market, but also in the management and security of such a fund," Egbunike said. "However, for Moriarty to be associated with this filing makes a significant statement as to the potential legitimacy of such a fund.
The Trustee will hold all of the trust’s bitcoins in US vaulting premises on a segregated basis,” the prospectus said, suggesting servers holding bitcoins will be located in the U.S. as a matter of course.