There is already a regulated market - the Winklevoss' Gemini exchange. They went out of their way to make sure everything about their exchange is in compliance, specifically for it to serve as the market for the ETF commodity.

Unfortunately for them, the SEC, quite reasonably, requires more than one regulated market to exist for the underlying commodity, and probably preferably not owned by the company behind the ETF itself. Seems obvious in retrospect.

> Unfortunately for them, the SEC, quite reasonably, requires more than one regulated market to exist for the underlying commodity

From the ruling, it doesn't really seem that was an issue. That Gemini does very little of the US and an utterly miniscule amount ogmthr global bitcoin trade made the surveillance agreement with Gemini insufficient, but a single-but-dominant regulated exchange would probably be sufficient.

An exchange that doesn't close shop on sudden market moves would be a good start. (Coinbase, which you mentioned specifically, was unreachable the whole time.) One that would honor all orders, in the right order, and with enough liquidity to make customers whole when they for some reason didn't, would be even better.

Then some proper options would be nice. Preferrably someone who doesn't trade against their own customers, which at least one exchange is open about. There's a lot that could be done in the Bitcoin ecosysten (well, at least we are rid of MtGox).

I would think regulated means the following: (Note that I don't believe this needs to be done by a government. It could be private.)

1. A governing body that can create rules and regulation for the market.

2. An enforcement body that can enact penalties for rule violations.

The problem I think is not so much the governing agency, it's the enforcement for rule violators. It's one thing to punish Mt. Gox for violating the exchange terms, but what if it's some shady anonymous bitcoin exchange broker in China?

> The next step seems to be to create a regulated market - anyone know what that means, or whether there is something inherent to Bitcoin that doesn't allow it?

It means commodity exchanges dealing in Bitcoin regulated by the CFTC or similar entities in other jurisdictions. There are some already, but they do a very small share of Bitcoin volume.

> Coinbase has KYC, banking relationships and tax integration, I'm sure that can be extended to an exchange.

That's money transmitter stuff, which is a different set of regulatory requirements.

You'd need to force all the unregulated exchanges to close down, and block ability to run smart contracts or any other software on it.

And do it in all the major jurisdictions?

Not "all" of the exchanges - I think the key is the term "significant markets". You need to have most people who do significant amounts of BTC transactions on regulated exchanges as opposed to everyone.

> You'd need to force all the unregulated exchanges to close down

No, you'd just need for the regulated exchanges to control a substantial share of the total volume of trade, which could happen by shift in trader preferences, unregulated exchanges becoming regulated, or, yes, unregulated exchanges shutting down.

That doesn't sound right. The etf is pinned to a single exchange (which they complained wasn't liquid enough) and there are thousands of informal unregulated gold markets all around the world.

> and block ability to run smart contracts or any other software on it.

How do you think smart contacts play a role?

Lykke.com is applying for MTF license in the UK. no exchange so far is regulated as a market.