The Winklevoss twins have secured a patent for the first cryptocurrency Exchange traded fund (ETF). The patent will now allow Winklevoss IP, the company owned by Tyler and Cameron Winklevoss to settle ETPs with cryptocurrencies such as bitcoin.
ETPs are derivatives based on an underlying investment instrument such as bitcoin. The price of ETPs are usually based on other investment instruments such as stocks and commodities.
According to the filing, the patent is defined as “Systems, methods, and program products for use with ETPs holding digital assets, including digital math-based assets, such as bitcoins, Namecoins, Litecoins, PPCoins, … Colored Coins, or Counterparty, to name a few.” The patent was filed in December 2017.
Bitcoin-Based ETF Rejected by SEC
An application for a Bitcoin-based Exchange Traded Fund by the Winklevoss brothers was last year rejected by the Securities & Exchange Commission (SEC).
The SEC cited possible manipulation of the highly volatile market and the lack of protections for customers for their disapproval.
“First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.”
The SEC said the application was inconsistent with sections of the Exchange Act.
“The Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”
The twins own Gemini, one of the notable cryptocurrency exchanges in the US. The two are among the few bitcoin billionaires who got in early.
The scene has however since changed and more institutional investors have expressed interest in the market. NYSE’s parent company ICE is said to be planning to launch a cryptocurrency exchange while Goldman Sachs has announced plans for a trading desk.
The CBOE and CME already offer bitcoin futures contracts but not ETPs exist in the US yet.