For Bitcoin ETF it’s too early, SEC says

8 years ago - Published in Finance, Fintech Land, Technical Analysis

The U.S. Securities and Exchange Commission (SEC) disapproved on Friday the Bats BZX Exchange filing to list and trade shares of the Winklevoss Bitcoin Trust. The shares, representing 0.01 BTC, would have tracked the price of bitcoins on the Gemini Exchange. The digital-asset exchange is owned and operated by the Gemini Trust Company, which would have owned the equivalent share value in bitcoins.

The SEC classified the shares as an exchange-traded product (ETP), which typically provide investors with exposure to securities or other assets such as commodities. The world's largest asset manager, Blackrock, states that the global ETP market is worth $3.5 trillion.

More specifically, the Winklevoss Bitcoin Trust shares are classified as a commodity-trust ETP. The SEC states that all previously approved commodity-trust ETPs have been “well-established, significant, regulated markets for trading futures on the underlying commodity, namely gold, silver, platinum, palladium, and copper.”

While the trust's Bats Exchange argues that the Bitcoin marketplace has strengthened in recent years and it is now unlikely that price manipulation would be successful in markets worldwide, SEC remains unconvinced at this time.

"The significant markets for bitcoin are unregulated," the filing reads. "Therefore, as the exchange has not entered into, and would currently be unable to enter into, the type of surveillance-sharing agreement that has been in place with respect to all previously approved commodity-trust ETPs [exchange-traded products] [..] the Commission does not find the proposed rule change to be consistent with the Exchange Act."

Another factor and one of which the SEC's decision largely relied upon is that since a large number of Bitcoin exchanges are unregulated — as well as being outside of the US — there is little in the way of global regulation or standards for security and protections against fraud.

In addition, checks in some countries that have attempted to regulate Bitcoin, such as China, can also cause virtual currency fluctuations.

Author and speaker Andreas Antonopoulos tweeted, “If you measure bitcoin's success by the approval of the incumbent and obsolete industry it replaces, you're doing it wrong.” He went on to say, “The ETF was denied because bitcoin can't be regulated, can't be surveilled. Feature, not bug.” The host of RT’s Keiser Report, Max Keiser, came to the same conclusion. “The reason to buy Bitcoin is the same as reason why SEC rejected the ETF. Can't be regulated. SEC confirmed no. 1 reason to own Bitcoin.”