SEC: Bitcoin-ETF from Winklevoss rejected again

The US Securites and Exchange Commission (SEC) has once again rejected an application by the Winklevoss brothers for approval of a Bitcoin ETF. This confirms the authority’s decision of last year.

But not all SEC members support the Bitcoin news

Already in October 2016, the Bats BZX Exchange applied to the SEC for listing of Bitcoin news: The SEC rejected the request of the investor twins in March of last year. In its justification, the SEC cited above all concerns regarding control and monitoring mechanisms at relevant marketplaces. According to the authorities, another problem was the lack of regulation of the markets.

The Winklevoss brothers then pushed for a revision of the decision and tried to achieve this by petition. The SEC continues to justify the renewed rejection with security and regulatory concerns regarding the BZX Exchange:

“[…] while the BZX states that […] transactions via the Bitcoin blockchain are publicly viewable, the blockchain only identifies parties to a transaction by a pseudonymous public key address. Furthermore, no distinction is made between Bitcoin trading activities and other Bitcoin transfer activities (e.g. for remittances, purchases of goods, or services).”

Therefore, the Crypto Exchange does not meet the SEC’s requirements regarding the containment of fraudulent activity:

“On the contrary, the Commission disapproves of this proposed rule change because BZX has not fulfilled its obligations under the Stock Exchange Act and the Commission’s Rules of Procedure to demonstrate that its application complies with the requirements of the Stock Exchange Act, in particular that its rules must be designed to prevent fraudulent and manipulative acts and practices”.

Resistance within the SEC

The SEC’s decision was not unanimous. Commissioner Hester M. Peirce is of the opinion that the Winklevoss application does indeed fulfil the conditions of the Stock Exchange Act. She criticises that the SEC’s reasoning is less about the proposed Exchange Traded Product (ETP) than about the Bitcoin market in general:

“As the Disapproval Order focuses on the Bitcoin spot market, it does not give adequate weight to the important role of the exchange as a self-regulatory organisation (SRO) within our regulatory framework. BZX should and would play a central role in monitoring the trading of trust shares. In exercising this function, BZX would perform the functions entrusted to it as an SRO and would be subject to the supervision of the Commission. In exercising this responsibility, BZX would have strong regulatory and business incentives to ensure the integrity of the products it lists for trading. There is nothing in the minutes to suggest that BZX is unwilling or unable to perform its duties under the Stock Exchange Act”.

No reason for FUD
From the SEC’s point of view, the rejection is understandable. With regard to the upcoming dates in September for the approval of further ETF applications, it is understandable that the authority is keen to keep expectations regarding Bitcoin ETF low. The fact that the Bitcoin share price is yielding somewhat, currently 3.9 percent, is not the end of the world. After the Bitcoin price increase of the last few days, this small correction is absolutely within the bounds and should therefore not be overestimated.