The Winklevoss brothers are speeding up SEC approval for their bitcoin fund

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Tech entrepreneurs Cameron and Tyler Winklevoss have appointed State Street as the transfer agent for their bitcoin-based exchange-traded fund (ETF), the Winklevoss Bitcoin Fund, according to their latest regulatory filing on Tuesday, the Wall Street Journal reports.

This means State Street will act as the fund’s administrator. The brothers also appointed San Francisco-based Burr Pilger Mayer to act as auditor for the fund.

The Winklevoss brothers likely brought these major players on board to increase the likelihood of SEC approval for their ETF. As transfer agent, State Street will record ownership changes, calculate daily net asset values, and maintain all records for the fund. As auditor, Burr Pilger Mayer will be responsible for carrying out monthly “proof of control” exercises to ensure that all of the Bitcoin reported as held by the ETF are legitimate.

The entrepreneurs probably hope that such rigorous oversight will reassure regulators that their fund is playing by the rules, and that the reputation of these firms will add respectability to their venture — increasing their chances of SEC approval.

The two businessmen likely want SEC approval because they think this will attract mainstream investors to their fund. The approval process for the Winklevoss fund has already dragged on for three years, according to the WSJ, and the SEC recently put approval on hold once again. We expect the brothers are persisting because success would mean they had the first Bitcoin-based ETF approved by the SEC, which could boost the attractiveness of the fund.

But first they have to convince the SEC that their ETF will not be unduly risky for investors — a hard task since Bitcoin has proven to be a very volatile currency, suffering a boom and bust from 2013 to 2014. It stabilized only recently, and its recovery is still tentative. Given this volatility, even with SEC approval, there’s no guarantee that investors will be reassured or willing to use the product.

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That’s because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain.

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  • Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
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