Cameron and Tyler Winklevoss, founders of cryptocurrency exchange Gemini, have once again been denied by the Securities and Exchange Commission (SEC) to list shares for the first-ever Bitcoin ETFs.
CNBC reports today, July 26th, that the commission denied the proposed ETF in a 3-1 decision. Following the announcement the price of Bitcoin fell 3 percent down to $7,880. The Winklevoss twins have been tinkering with their proposed “Winklevoss Bitcoin Trust” for a number of years now, while also seeking a proposed rule change from the SEC.
A report released by the SEC listed a number of reasons for denying the proposed rule change, citing concerns surrounding market volatility, fraud and investor protection.
The Race For SEC Approval Continues
The SEC decision puts the Winklevoss twins once again behind in the race for the first-ever Bitcoin ETF. Other possible frontrunners include VanEck in partnership with SolidX, Direxion, and Bitwise Asset Management.
VanEck and SolidX
In a story published yesterday, VanEck is partnering with SolidX for its latest Bitcoin ETF application. The company has begun new efforts to lobby for SEC approval of Bitcoin ETFs and is arguing that BTC ETFs will help combat price manipulation in the cryptocurrency market. In a letter to the SEC VanEck writes,
“Given the proposed ETF’s regulation under the Securities Act of 1933 and 1940 Act and the fact that it offers exposure via regulated and surveilled bitcoin futures, we reasonably expect the proposed ETF to reduce potential manipulation and operational risk associated with a bitcoin investment product.”
Meanwhile, Direxion has also filed with the SEC for approval of its Direxion Bitcoin ETF.
News on Tuesday revealed that the SEC has postponed its decision for the proposed ETF until September 21, 2018. The SEC announced the decision stating,
“The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change.”
Bitwise Asset Management
Lastly we have Bitwise Asset Management, which announced on July 24th that it too had filed with the SEC to launch the first publicly-offered regulated cryptocurrency index ETF.
Yet to have garnered as much attention as previous crypto ETF submissions, Bitwise has created what it calls the Bitwise Hold 10 Cryptocurrency Index Fund. The fund tracks the returns of Bitwise’s HOLD 10 Index, which acts as a “market-cap-weighted index of the 10 largest cryptocurrencies, rebalanced monthly.”
CNBC reports that the SEC “emphasized that the disapproval does not rest on an evaluation of whether bitcoin or blockchain technology has value as an innovation or investment.”
Indeed, the primary mission of the SEC surrounding cryptocurrency appears to be protecting investors while simultaneously preventing fraud and manipulation in the market. Bitcoin, along with the rest of the cryptocurrency marketplace, have unfortunately been plagued in recent months with wild price fluctuations and a litany of negative reports ranging from hacked exchanges, insider trading, malicious malware and scam ICOs.
A published staff letter from earlier this year by the SEC states the matter very clearly:
“Concerns have been raised that cryptocurrency markets, as they are currently operating, feature substantially less investor protection than traditional securities markets, with correspondingly greater opportunities for fraud and manipulation. The Commission has also discussed concerns relating to the risk of fraud and manipulation in cryptocurrency markets in orders denying exchange proposals to list the shares of commodity trusts that would hold cryptocurrency. In addition, a number of recent media reports have highlighted a range of possible vectors for potential manipulation of cryptocurrency markets. Although some funds may propose to hold cryptocurrency-related products, rather than cryptocurrencies, the pricing, volatility and resiliency of these derivative markets generally would be expected to be strongly influenced by the underlying markets.”
On a final note, the SEC also raised concerns regarding the vast majority of cryptocurrency volume taking place outside of SEC jurisdiction. To date, more than 75 percent of Bitcoin’s volume occurs outside the U.S. and 95 percent of Bitcoin’s trading volume occurs on non-U.S. exchanges.
The SEC’s rejection of the Winklevoss Bitcoin Trust and the cited concerns surrounding it don’t bode well for cryptocurrency successfully entering into mainstream markets in the near future. However, with so many competing parties vying for Bitcoin ETFs, the pressure is mounting for an eventual approval. With all of the build-up behind it, it is difficult to imagine that cryptocurrency entering Wall Street won’t also bring with it record-breaking booms for the market.
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