The rejection of the Winklevoss ETF by the U.S Securities and Exchange Commission [SEC] led to a huge buzz in the cryptocurrency community. The rejection of the proposed rule change even led to one of the Commissioner of SEC, Hester Peirce, speak up against the commission’s decision.
During an interview with CNBC, Hester stated that the SEC has an important role to play and spread the word across the globe that the U.S capital markets are open for innovation. She said that this is the main reason which led to her open dissent regarding the Winklevoss ETF.
The Commissioner said that she is not a hodler of Bitcoin [BTC] but is a “big fan” of innovation. Hester said that Bitcoin and other cryptocurrencies have a lot of interesting momentum in the space and that cryptocurrency and blockchain are solutions for the long-term standing problems.
The SEC commission consists of five members although for the ETF decision there were only four. The majority vote was against the approval of the proposed rule change. Hester explained that the ETF rejection decision was first made by the staff of the commission and not the commissioners. The application was turned down by the staff which was passed on to the commission which consists of four people out of which three opposed the proposal.
“An exchange comes in and then they say, we have a rule change and we would like to put into place which would allow us to trade this product and so the majority of the commission said that the proposed change was not consistent with the government the governing statute. In this case, that’s the securities exchange act. I take the position that actually the change that was before us was actually consistent with the exchange act.”
She said that there was no reason for them to not allow Bitcoin [BTC] to trade on the exchange. This was the reason she approved the proposed rule change whereas her colleagues believed that they should not go ahead with the proposal. Hester states that the commission focused on Bitcoin and raised some concerns about the underlying market.
The Commissioner considers that the move made by the commission goes beyond what the statute permits the commission. She thinks that the commission should have focused on the exchange-trade platform Bitcoin was going to be traded on as opposed to focusing on the underlying Bitcoin market. Hester said that even if that were the case, she would have still drawn upon a different conclusion.
The SEC had stated the price manipulation of Bitcoin as one of their concerns to which Hester claims that they do not have the jurisdiction to look at the underlying assets. She states that gold and oil are underlying assets as well but the SEC does not have the purview to look at how those markets work. According to her, the SEC should be focused on the market that is trading the security which in the Winklevoss case would be the exchange-traded product.
Hester also hopes that the commission consider the dissent while making the decision for the next Bitcoin ETF application. She said:
“I mean I hope that by putting out what I believe to be a reasoned analysis of the approach that we should take that then my colleagues will take it into consideration and that it will help them as we think through the next one of these. So that’s the hope we are always trying to influence one another’s thinking. That is the part of what we do as a commission.”
The commissioner also spoke about the VanEck ETF application. She said that the commission would not change for the decision making of the ETF and they would follow the same process as they did before with the Winklevoss ETF. Hester stated that she does not want to talk about a product which is currently under review but as a general principle, the SEC should be looking for ways to increase opportunities for investors. She is hoping that in the future, the SEC will be willing to increase the potential opportunities for investors to participate.
The Commissioner continued:
“In these markets [cryptocurrency market], in a way, that is consistent with their preferences and consistent with a way that would be effective and efficient for them [investors].”
Furthermore, Hester Peirce states that she can not speculate whether Bitcoin [BTC] ETF would be passed by the end of this year. However, the commission would consider every application on its own facts and circumstances.
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