SEC Rejects Nine Bitcoin ETF Applications
The U.S. Securities and Exchange Commission (SEC) on Wednesday rejected a total of nine proposals to list and trade bitcoin exchange-traded funds (ETFs), sending a strong signal that securitization of cryptocurrencies could be a long ways off.
In three orders published on its official website, the SEC has denied applications by Direxion, ProShares and GraniteShares to bring bitcoin to market in ETF form. Unsurprisingly, the regulator cited fraud and manipulation concerns as the main reasons for the rejection.
In terms of breakdown, the agency rejected five proposed ETFs from Direxion, two from ProShares and an additional two from GraniteShares. However, in all cases, the SEC issued the following rationale:
“[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
In addition to the above, none of the applications could convince the agency that the bitcoin futures market is of “significant size,” which is likely referencing underlying liquidity constraints.
Last month, the agency rejected for a second time a bitcoin ETF application submitted by Cameron and Tyler Winklevoss. However, the ruling didn’t go down lightly at the SEC, with Commissioner Hester Peirce formally objecting on grounds that it inhibits innovation in the sector.
Search for ‘Holy Grail’ Continues
Investors have become so preoccupied with the notion of a bitcoin ETF they’ve virtually ignored a multitude of positive developments tied to institutional trading and custody. Chief among them is the creation of Bakkt, a cryptocurrency holding company backed by Intercontinental Exchange, Starbucks and Microsoft, among others.
Although the latest rejections may seem like a setback, those in the know have long held the belief that a bitcoin ETF is unlikely to be approved this year. What’s more, none of the applications rejected on Wednesday offers quite the same advantages as the joint proposal submitted by VanEck and SolidX. The proposed VanEck SolidX Bitcoin Trust will be backed by physical bitcoin and insured against loss or theft.
The SEC has delayed its ruling on the VanEck application until Sept. 30. However, further delays are possible as the Commission reviews thousands of public comments related to the application.
Bitcoin markets held relatively steady following the announcement. The bitcoin price hovered around $6,415 on Bitfinex, having gained 0.8% during the session. At current prices, BTC accounts for 53.2% of the total cryptocurrency market.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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