Motivations for a Bitcoin ETF

As Bitcoin matures into a viable asset class investors demand easier ways to join the burgeoning market. Apart from retail interest, institutions have billions of dollars on the sidelines patiently waiting to enter the market.

The S-1 filing describes shares of the ETF to be “Easily Accessible and Cost Efficient.”  The Winklevoss Bitcoin Trust will allow investors to avoid the process of purchasing bitcoins on exchanges and having to handle security and storage. Shares would trade just like stocks, allowing mainstream investors to enter the market through an existing broker easily.

SEC Ruling: Winklevoss’ ETF Denied

Recently, the SEC denied The Winklevoss’ Bats BZX Exchange, Inc. (BZX) second ETF proposal. The Commission was careful to emphasize that the decision denying a Bitcoin ETF does not rest on evaluating whether or not bitcoin has inherent value.

Manipulation Still a Primary Concern

The SEC has yet to approve a digital currency-based ETF. In the latest decision, the SEC noted that more than 75% of the volume of bitcoin trading occurs outside the U.S., with only 5% of trading taking place on U.S. exchanges. Many overseas exchanges are unregulated, making markets susceptible to illegal market manipulation strategies such as wash trading.

SEC Commissioner Dissents

According to Commissioner Hester Peirce, the disapproval order focuses on the characteristics of the spot market for bitcoin, rather than on the ability of BZX to surveil trading of and to deter manipulation in their listed shares. Peirce noted if the disapproval order’s rigorous standard were applied consistently, many commodity-based ETFs would not pass.

Approval of this order would demonstrate the SEC’s commitment to acting within the scope of their limited role in regulating the securities markets. The disapproval denies investors from accessing Bitcoin through a predictable, transparent, and simplified product.

 100% Chance of a Bitcoin ETF

 The Winklevoss twins aren’t alone in the Bitcoin ETF space. On July 24th, the SEC delayed its decision on a separate Bitcoin ETF application from investment firm Direxion. Bitwise also filed its own application that would track an index of ten cryptocurrencies.

Jan van Eck, CEO of VanEck Associates is 100% certain the SEC will pass a Bitcoin ETF in the long run. The VanEck, Cboe, and SolidX partnership currently awaits SEC ruling on their proposed Bitcoin ETF. VanEck is hopeful of gaining approval addressing the SEC’s concerns here. Mark your calendars — the ruling is expected to occur between August 10th and 16th.


The disapproval order unintentionally undermines investor protection, precluding investors from benefiting from the increased institutional discipline that comes with approval. Bitcoin markets are steadily maturing, and mainstream finance is knocking at the door. Mass adoption is so close yet so far.

The Issue

On January 17th, 2018 the court of Midden-Nederland ordered Koinz Trading BV to pay the mining proceeds of 0.591 bitcoin to Mr. J.W. de Vries, or pay a 10,000 euro fine. Koinz Trading BV had two options: either pay up or declare insolvency.

About two weeks later, the company filed a claim for bankruptcy. If granted, the court would be unable to enforce the 10,000 euro fine. Paying the claim in bitcoin is the only remaining option, which can only happen after recognizing bitcoin as a verifiable claim. A verifiable claim essentially means proving the delivery of an underlying asset (property, assets, wire transfer) is possible.

The Ruling

According to a court document published March 20th, the court states that bitcoin seems to carry the hallmarks of a property right:

“Bitcoin exists, according to the court, from a unique, digitally encrypted series of numbers and letters stored on the hard drive of the right-holder’s computer. Bitcoin is ‘delivered’ by sending bitcoins from one wallet to another wallet. Bitcoins are stand-alone value files, which are delivered directly to the payee by the payer in the event of a payment. It follows that a Bitcoin represents a value and is transferable. In the court’s view, it thus shows characteristics of a property right. A claim for payment in Bitcoin is therefore to be regarded as a claim that qualifies for verification.”

The court found that bitcoin’s characteristics make it a verifiable claim. Since the obligations of the contract between Mr. De Vries and Koinz Trading BV were in bitcoin, the unpaid amount should be paid back with the same currency.


Koinz Trading BV owes 0.591 bitcoin to Mr. De Vries even after being granted bankruptcy. Due to volatility, both the business and investor face increased foreign exchange risk if bitcoin-denominated contracts are enforced in bitcoin rather than the fiat-equivalent. This ruling could set precedence in common-law systems having significant impacts in the burgeoning cloud mining industry and beyond.


On March 14th, BlockExplorer incorrectly reported that Sierra Leone became the first country to use a blockchain to capture votes during a presidential election. This article will clarify the extent of Agora’s involvement in Sierra Leone’s election.

What is Agora?

Agora is a Swiss-based voting technology company that has developed an end-to-end verifiable voting solution for governments and institutions. Their mission involves spreading fair and transparent elections around the world using blockchain technology.

The Claims

The company, Agora, claimed to have run the first blockchain-based election in Sierra Leone. Meanwhile, the company just observed the results and entered the data into their blockchain.

The Facts

— National Electoral Commission of Sierra Leone (@NECsalone) March 19, 2018
  • The National Electoral Commission (NEC) accredited Agora as an international observer of the March 2018 Sierra Leone presidential election.
  • Official election results only come from the NEC.
  • Agora’s results were published on our website five days before the end of the official manual count carried out by the NEC
  • The company’s results are very close to the NEC’s published results.
  •  The goal was to have this election demonstrate the company’s capabilities and open the door for further cooperation with the NEC in the future.

Honest Mistake or PR Stunt?

Prior to the NEC’s statement, Agora CEO Leonardo Gammar stated, “This is the first time a government election is using blockchain technology.” The misleading statement soon made headlines drawing praise from the blockchain community. The company has since taken to Medium to clarify its involvement and address criticism. Agora’s proof of concept demonstrates the potential of blockchain-based voting systems, however, the world’s first election officially using a blockchain is yet to occur.


A SAFT is an investment contract (security) offered by blockchain developers to accredited investors. The tokens that are ultimately delivered to the investors, though, should be fully-functional, and therefore not securities under U.S. law. The SAFT imitates the Y Combinator Simple Agreement for Future Equity, or “SAFE,” which has been widely used to finance early-stage companies for years.

What’s the problem?

The ICO model is an increasingly popular mechanism to raise startup funds from all over the world. Without clear regulations, token issuers and investors have operated under a cloud of legal uncertainty. Did these public sales result in unregistered securities? Why does that matter?

Issuing unregistered securities is a violation of Section 5 of the Securities Act of 1933. Beyond significant monetary penalties, issuers could face a maximum of five years of federal prison.

At a U.S. Senate hearing in February, Securities and Exchange Commission chairman Jay Clayton stated, “I believe every ICO I’ve seen is a security.” As technology continues to outpace regulations, the industry is in desperate need of a standard, compliant transactional framework to finance token networks.

The SAFT: A Potential Solution

The reasoning behind the SAFT framework is the fact that there is no bright line determining which types of tokens are securities and which are not.

Security tokens may serve as a substitute for traditional securities such as corporate stocks. On the other hand, utility tokens are designed to function like a Chuck-E-Cheese token, providing utility to purchase a service on its native network.

The SAFT framework initiates a way to help utility token issuers finance a distributed network without breaking financial regulations; specifically securities laws. Although utility tokens aren’t designed to be securities, they might end up being considered securities at the time of issuance by the U.S. Securities and Exchange Commission (SEC) when sold to the public.


How does a SAFT Work?

  1. Developers of a token-based decentralized network enter a written agreement (SAFT) with accredited investors. The document calls for investors to fund the development of the network in exchange for discounted tokens at a future date. The company developing the network registers with the SEC and does not issue tokens.
  2. The developers use investor funds to develop the network. Investors do not receive tokens at this point.
  3. Once the network is functional, tokens are issued and delivered to investors. At this stage, tokens can be sold to the public directly or through exchanges.

At a high-level, you can think of a SAFT as a deferred ICO. Rather than issuing tokens for cash simultaneously, developers create a contract (SAFT) and raise money to develop a functional platform before creating tokens.

At this time, utility tokens are genuinely functional, supporting the argument that they are not actual securities. This argument is essential as no court, regulator, or taxing authority has yet interpreted the SAFT framework.


  • The framework can work within existing laws, one that doesn’t assume legislative change to accommodate the technology.
  • SAFTs can reduce risks for institutional investors, and public investors can still access tokens, albeit at a later date.
  • Potentially mitigates the mass exodus of crypto developers to foreign jurisdictions.


  • The SAFT framework is not very useful to non-utility tokens that are themselves securities when sold to the public
  •  It won’t aid utility tokens where purchasers rely on efforts of the seller to increase the price after the token is already in circulation. Examples include buybacks and promises to develop functionality after the token sale.
  • The framework currently focuses on U.S. federal law and potentially deemed illegal in other jurisdictions.
  • Excludes public investors from participating in the early stages of a presale.

A Move in the Right Direction

The SAFT framework is an initial step towards an emerging standard for how blockchain network developers can responsibly innovate. It provides one approach to balancing the risk and reward among stakeholders and benefits from adhering to existing laws.

The SAFT project is a community attempt at self-regulation and has a long way to go before becoming an industry standard. That said, there is an open call for participation, and you are encouraged to join the project.

More Information


Gemini is a New York-based, licensed digital asset exchange that also offers custodian services for digital assets.  The exchange was launched in 2015 by prominent bitcoin investors Cameron and Tyler Winklevoss and ranks #12 on BlockExplorer’s Top 25 Exchanges of 2017 list. The exchange serves the U.S., U.K., Canada, Hong Kong, South Korea and Singapore.

The platform allows investors to trade BTC/USD, ETH/USD, and ETH/BTC. Its clean and easy-to-use interface is well suited for both beginners and advanced traders.

While a limited number of trading pairs might be a drawback for traders, the Winklevoss twins said their main 2018 goal for Gemini Exchange is expanding to other tokens such as Bitcoin Cash and Litecoin.

A major advantage of Gemini is their proactive approach to abide by regulations.  In 2015, Cameron Winklevoss stated, “Our philosophy is to ask for permission, not forgiveness.”  Before launching, it became a fully compliant and fully registered enterprise with FDIC coverage on client USD balances. It is also the first US exchange to be officially licensed for both ether and bitcoin trading making it one of the most legitimate exchanges in the world.

Gemini Exchange Summary:

gemini crypto

Total trading pairs: 3
Founded: 2015
Deposit fees: No
Withdrawal fees: Free up to 10 withdrawals per month
Trading fees: 0.00% – 0.25%
Margin trading: No
Verification levels and deposit/withdrawal limits:

Verification Level


Individual ACH Daily Deposit/Withdrawal: $500/$10,000; ACH Monthly Deposit/Withdrawal: $15,000/$100,000; Cryptocurrency: No Limit
Institutional ACH Daily Deposit/Withdrawal: $10,000/$10,000; ACH Monthly Deposit/Withdrawal: $300,000/$100,000; Cryptocurrency: No Limit

Creating Your Account

Starting a new account at is simple — just go to the homepage and click on Register

Enter your full name, email address, and create a password — then select Create My Account

Open a new tab and check your email for an Activation Code, copy and paste it into the previous tab — then select Submit


Next is a three-step identity verification process:



  1. Link your cell phone number up with your account — this makes receiving login verification codes easy. Two-factor authentication is a standard requirement for most exchanges and enhances account security.
  2. Link your bank account using your online banking login credentials. The bank account must be in the same name as the new Gemini account holder. If you don’t want to fork over your login information, you can verify your bank account using a wire transfer instead.
  3. Finally, you must submit documentation that proves your identity and address, like a copy of a bank statement with your address clearly printed.

Conclusion: Is Gemini a Good Exchange?

Gemini has a solid reputation and suitable volume for institutional and individual investors. A smooth interface paired with real USD, regulatory compliance, and low fees makes Gemini an attractive alternative to Coinbase’s GDAX.