Bitcoins in Japanese NISA Account

The SEC just rejected the Winklevoss application for a bitcoin ETF.

The SEC basically said that Bitcoin is not ready for approval yet and should come back a couple of years later when it is.

Footnote 96 describes other markets where the SEC approved an ETF. For gold, it states that “the most significant gold futures exchanges are the COMEX division of the NYMEX and the Tokyo Commodity Exchange”. Similar findings are noted for silver, palladium, and copper.

If you accept that investors should be protected against fraudulent trading practices, doing so is obviously much easier if you have only two significant exchanges which are under heavy oversight than if you have the present Bitcoin exchanges infrastructure.

Said infrastructure has made some progress since the days of MtGox, but is still far away from what the SEC expects in protection against fraudulent trades.

Japan has new legislation in place which would have prevented MtGox from operating. But we are still years away from a world where bitcoin trading is dominated by two exchanges in New York and Tokyo.

It’s still early days. Investors in bitcoin are on their own, and insider trading and other market manipulation are still without sanction in many cases.

With this new way of buying bitcoins blocked for the time, potential investors will need to use one of the unregulated exchanges. It is open to doubt if that keeps them safer compared to buying over an ETF, but that’s not the SEC standard.

That doesn’t mean investors can’t buy bitcoins. It just means they need to put in some extra effort. And it also means that it will be difficult to have bitcoins in a Japanese NISA account (which offers tax-free capital gains).

Someone should try to figure out a way to do that (bitcoins in Japanese NISA). That would seem to be a very attractive proposition, considering the past capital gains record.