By It was reported by Reuters, that a decision was made by the SEC (U.S. Securities and Exchange Commission). The SEC is the agency responsible to regulate the markets, with a central focus now shifting to cryptocurrency legalities. The decision made by the SEC was to reject the nine applications who want to list and trade various Bitcoin (BTC) exchange-traded funds. However, the rejected applications will now be reconsidered.
A total amounting to nine inquiries, from three distinct companies, to bring BTC-based ETFs to market was denied by the SEC on Wednesday. This was reported to be based on allegations that the products did not comply with the requirements stipulated by the “Exchange Act Section 6(b)(5). The Act is the fundamental requirement that the national securities exchange’s rules have designed and implemented to circumvent fraudulent and manipulative acts and practices through the use of cryptocurrency technologies.
However, letters have now been released by the SEC, in which they state that they have requested for authority to take action, in the intended review of their decision. The letters have not revealed what the review will include, or if any deadline for the decision has been considered.
An ETF, or exchange-traded fund, refer to marketable securities that are able to track a commodity, bonds, basket of assets and index funds. EFTs are therefore proportionately represented in the fund’s shares. The prices of EFTs fluctuate continuously, as they are bought and sold on a stock exchange throughout the day.
The application for a Winklevoss BTC ETF fund by Bats BZX Exchange, Inc was rejected by the SEC, in March, due to “the largely unregulated nature of BTC markets”. The SEC attempted to justify their decision by arguing that the verdict has nothing to do with the potential value that the innovation and technology around the development of cryptocurrency are able to provide. Thereafter, the BTC ETF fund by Bats BZX Exchange, Inc then appealed the decision made by the SEC. However, last month, it was also rejected by the SEC.
A day after the Winklevoss fund appeal was rejected, the SEC Commissioner Hester M. Peirce issued a statement of official opposition of the agency’s disapproval of the Winklevoss fund. BTC can be used to make global transactions, without the need for a central authority such as banks or governments, which will assist with the quick and easy, global movement of money. The SEC has therefore made a fundamental error when the decision was made to reject the appeal. It was stated that the agency is overstepping its “limited role,” when it focused on the characteristics of the underlying BTC market, rather than the derivative. The SEC reported the need to regulate derivative markets at a minimum, which are related to the underlying assets. Furthermore, Peirce argued that the disapproval is centered around BTC as an investment. This is now expected to have significant consequences for other commodity-based ETPs. She then went on to suggest that the disapproval order will be detrimental to innovation and is therefore likely to “inhibit” the institutionalization of the BTC market.
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