Circle Internet Financial, developer of blockchain-based international payments app CirclePay, has submitted an official response to the SEC regarding the Winklevoss Bitcoin ETF.
Circle’s Lead Quantitative Trader Dan Matuszewski, and Joshua Lim, Head of Trading Operations at Circle, made the case that institutional investors in the United States would benefit greatly from having access to a liquid, regulated Bitcoin investment vehicle, without taking on the risks associated with securing the digital currency.
Furthermore, Matuszewski and Lim reasoned that individual U.S. investors, who are often forced to use foreign, less secure bitcoin exchanges due to the lack or regulated domestic providers, would also stand to benefit from the ETF:
“The listing of the Winklevoss Bitcoin Shares would open up a conventional route into this asset class for institutional and individual investors while eliminating many of the risks associated with handling cryptographic keys and dealing with unregulated online exchanges and custodians.”The Bitcoin ETF would also lead to better price discovery as bitcoin spot prices often greatly diverge across international exchanges, “we believe this strengthens the case for an investment product that does not rely on spot price of less credible exchanges to value its holdings and instead relies on the spot price on the exchange managed by the Gemini Trust Company,” says Circle.
Despite the growing liquidity in the Bitcoin markets, excessive volatility is still a lingering issue. Because Gemini does not offer leveraged trading, Matuszewski and Lim theorize that price discovery and market stability would improve as more volume is concentrated in one place.
“Gemini does not offer such products and would be able to serve as a trusted, regulated spot exchange for institutional market participants driving the arbitrage mechanism that ensures efficient pricing between spot price and the Winklevoss Bitcoin Shares.“And a stable exchange rate would also be very beneficial to online payment companies like Circle that use Bitcoin’s blockchain as a payment rail, which allows their users to send cross-border fiat cash payments in a timely manner via CirclePay.
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