Meeting called to discuss new rule regarding security status of cryptoassets.
Date: September 30, 2020
Time: 11:00 – 11:30 a.m. PT
Reason for Meeting: Subsequent meeting proposed at the standard monthly meeting of September 29, 2020
In Attendance: Matt Hougan (Chair), Hunter Horsley (Member), David Lawant (Member)
Item 1: Discussion Over a New Proposed Rule Concerning the Risk of a Cryptoasset Being Deemed a Security by US Federal Securities Laws
Following the discussion started on September 29, 2020, the Index Committee discussed adding a new rule to the eligibility requirements that cryptoassets need to fulfill in order to become a constituent of the Bitwise crypto indexes.
The rule would be added under the section III.B.i, as the item “g”, in the Bitwise Crypto Index Methodology, moving all other rules down. It would read as follows:
Does not face undue risk of being deemed a security under US Federal Securities Law in the opinion of the Bitwise Crypto Index Committee, given present knowable facts and circumstances.
The Index Committee members agreed that this rule would contribute to make the index more investable by professional investors and investment funds, including the Bitwise 10 Crypto Index Fund. They also agreed that a cryptoasset being deemed a security would entail uncompensated risks including liquidity risks and enforcement actions.
It was agreed that the implementation of this rule would be done through a checklist conducted at a minimum on a quarterly basis that would entail: i) Internal analysis of the asset’s security status using a developed frameworks ii) Consideration of the Crypto Rating Council’s score of how likely an asset is to be considered a security; iii) The listing status of the asset on US cryptoasset trading venues that are regulated under the BitLicense from the NYSDFS; and iv) Past rulings or opinions issued on the security status of an asset by the relevant regulatory authorities. Decisions will be made based on the totality of facts and circumstances. Index Committee members can call for a one-off review of an asset intra-quarter if they believe it is merited by changes in the facts and circumstances.
The Committee voted 3-0 in favor of approving the new rule.
Item 2: Adjournment
The Chairman adjourned the meeting.
Based in San Francisco, Bitwise is one of the largest and fastest-growing crypto asset managers, offering both index and active strategies across a wide array of investment vehicles. The firm is known for creating the world’s largest crypto index fund (OTCQX: BITW), a suite of crypto-focused equity and futures ETFs, and investment products that span Bitcoin, Ethereum, DeFi, and NFTs. Bitwise focuses on partnering with financial advisors and investment professionals to provide quality education and research. The team at Bitwise combines expertise in technology with decades of experience in traditional asset management and indexing, coming from firms including BlackRock, Blackstone, Meta, and Google, as well as the U.S. Attorney’s Office. Bitwise is backed by leading institutional investors and asset management executives, and has been profiled in Institutional Investor, CNBC, Barron’s, Bloomberg, and The Wall Street Journal.
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