Could the Bitcoin Filing Come at Worse Time for the ETF Industry?

For the ETF business, there might be such a thing as bad publicity.

From a PR standpoint, the $1.5 trillion industry is already somewhat on its heels in the wake of recent media stories questioning the internal “plumbing” behind ETFs.

For example, BlackRock’s iShares unit and other ETF providers are trying to get the message out that their products held up relatively well during the recent market turmoil.

So the last thing they need is another story popping up causing investors to question the integrity of the business.

Enter the Bitcoin ETF.

On Monday, the Winklevoss twins known for their legal feud with Facebook (FB) founder Mark Zuckerberg filed a registration statement with the SEC to launch Winklevoss Bitcoin Trust. [A Bitcoin ETF May Become a Reality]

The exchange-listed product would give investors “a cost-effective and convenient means to access exposure to Bitcoins.”

The Bitcoin ETF filing was met with immediate scorn by many financial bloggers. For example, Josh Brown at The Reformed Broker tweeted the idea is the “[m]ost ridiculous investment product of all time.”

Reports also note the Winklevoss twins are big Bitcoin holders and have a stake in BitCoin payment processor BitInstant.

The sponsor for the proposed Bitcoin ETF is Math-Based Asset Services LLC, which is wholly-owned by Winklevoss Capital Management LLC.

The brothers do appear sincere about their intent to bring the product to the market.

Kathleen Moriarty, a partner at law firm Katten Muchin, is named in the Winklevoss Bitcoin Trust filing. She has “extensive experience representing investment companies with the creation, structuring and development of new exchange-traded products,” according to her profile on the firm’s website. She was actively involved in the development of State Street’s SPDRs and has since advised on the creation of many more ETFs including products from iShares, Vanguard, ProShares, WisdomTree and IndexIQ.

“The trust brings bitcoin to Main Street and mainstream investors to Bitcoin,” said Tyler Winklevoss in a report from DealBook. “It eliminates the friction of buying and reduces the risks associated with storing bitcoin while offering similar investment attributes to direct ownership.”

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