Bitcoin Plummets As SEC Rejects Winklevoss ETF Application
Yesterday, Cameron and Tyler Winklevoss, founders of Gemini cryptocurrency exchange, had a disappointing day as the US Securities and Exchange Commission rejected their proposal to establish what would be the first ever Bitcoin Exchange Traded Fund (ETF).
Notably, this is their second attempt to list Bitcoin ETF in the US market. The SEC rejected the application submitted by BATS BZX exchange to list the Winklevoss Bitcoin Trust’s commodity-based ETF by a 3-1 vote. Following the rejection, Bitcoin plunged by more than $400 to trade at $7,800 levels.
In 2017, the SEC vetoed an application for the “Winklevoss Bitcoin Trust”. However, in June, Gemini Group placed on SEC’s table, a proposal for a rule change. This time, while rejecting the application, SEC stated that it is not in agreement with Winklevoss’ argument that Bitcoin markets, including the Gemini Exchange, are not prone to manipulation. The Commission also underlined critical issues such as investor protection and fraud.
The SEC also stressed that the rejection was not based on an assessment of whether Bitcoin or blockchain technology has inherent value as a path breaking technology or investment vehicle.
The Commission, however, pointed out that its main objective is to prevent frauds and market manipulation, thereby protecting investors. In this regard, the Commission expressed worries over alleged fraud and price manipulation practices revolving around Bitcoin, which is traded mainly in unregulated market.
As mentioned earlier in this article, the regulator is yet to permit listing of a cryptocurrency based ETF. Earlier in January, the Commission published a letter highlighting “significant investor protection issues that need to be examined” before promoters can put these funds on the market.
The SEC has also pointed out that more than 75% of the Bitcoin trading volume happens outside the US. More importantly, 95% of the Bitcoin trading volume occurs in non-US exchanges. The Commission is also concerned about the wide bid-ask spread across different exchanges. The regulator pointed out that the Bitcoin futures markets is still relatively small, 20% the volume of platinum and only 2.5% that of silver.
As for claims that Bitcoin price cannot be easily manipulated, the SEC “finds that the record before the Commission does not support such a conclusion.”
Notably, there is yet another Bitcoin ETF application – The VanEck SolidX Bitcoin Trust – on SEC’s table. It was filed jointly by VanEck and SolidX and got published for comments on July 2. The SEC made no comments about that application. According to Dodd Frank Act, the regulator should announce their final decision within 45 day of the publication of a proposal. In the case of VanEck SolidX Bitcoin Trust application, the 45 day period ends on August 16.
Earlier this week, Bitcoin cross $8,300 level, mainly because of rumors that the SEC may approve the investment vehicle in the coming month. The other application is also expected to face a similar fate as the reasons provided for rejecting this application is also applicable to the next one. Additionally, the agency has put on hold decisions on five other Bitcoin ETFs filed by NYSE Arca, Inc. Furthermore, Asset manager Bitwise has also joined the queue of applicants on Tuesday.