Winklevoss Bitcoin ETF Proposal Rejected By SEC

Winklevoss Bitcoin ETF Proposal Rejected By SEC

Winklevoss Bitcoin ETF Proposal Rejected By SEC

The SEC (Securities & Exchange Commission) had previously rejected a similar application in 2017, but an improved application was resubmitted in June, which included a proposal for a rule change. The exchange commission said that it backed out of a change of rule, at the behest of Bats BZX exchange. After having a proposal rejected a year ago, the Gemini exchange founders had hoped to secure their Winklevoss Bitcoin Trust on BATS Global Market's BZX stock exchange with this latest attempt. The proposal was rejected because it is not "designed to prevent fraudulent and manipulative acts and practices [and] to protect investors and the public interest". Nonetheless, the regulator made it clear that it's not making a judgement call per se on the value of bitcoin or blockchain, the digital currency's underlying distributed ledger technology, as a potentially valuable innovation or investment.

She added that "more institutional participation would ameliorate numerous Commission's concerns with the bitcoin market that underlie its disapproval order".

The Securities and Exchange Commission rejected on Thursday a bid by the Winkelvoss twins to create an exchange traded product for Bitcoin, citing the potential for market manipulation and a lack of liquidity. "Accordingly, I would set aside the action the staff took by delegated authority in this matter and approve the proposed rule change".

"Apparently, bitcoin is not ripe enough, respectable enough, or regulated enough to be worthy of our markets". The SEC would rather grant an ETF to an existing institution over a new one.

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Since, it is expected that ETF will be a tool that will attract more institutional investors into the Bitcoin market. More importantly, 95% of the Bitcoin trading volume occurs in non-US exchanges.

"As long as these investors decline to enter the bitcoin market because there is no efficient vehicle that would reduce the costs of entry, the features of the bitcoin market that cause the Commission concern are likely to persist". Conspiracy theorists internet wide suspect foul play, especially given that the decision relates to a two-year-old application and a year-old rejection. At least five other bitcoin ETF proposals before the SEC are still pending. "Because adequate surveillance-sharing agreements are not in place - and any current surveillance-sharing agreements are with bitcoin-related markets that are either not significant, not regulated, or both- the Commission concludes that the proposal is inconsistent with Exchange Act Section". Many analysts are for them, as they can potentially provide new outlets for institutional traders in the cryptocurrency arena.

Notably, the SEC is also looking into a number of other ETF applications, including a joint application from VanEck and SolidX.

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