The much-awaited decision by the U.S. SEC to approve or reject applications by GraniteShares, Direxion and ProShares to list and trade Bitcoin exchange-traded funds (ETFs) is finally out, and the news is not pleasing for the cryptocurrency community, including us. The SEC disapproved the applications, publishing its decision on August 22nd 2018.
The rejection came a day ahead of the anticipated deadline, which was set on August 23rd 2018. For all the disapprovals, the commission stated that:
The 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.
However, the SEC was quick to note that the rejections are not focused on the utility value of bitcoin and blockchain technology in general as an investment or innovation. The commission explained that:
[The agency] emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.
The fresh disapproval by SEC echo concerns the commission had in its initial high-profile Bitcoin ETF rejection in March 2017 by the Winklevoss twins, stating that:
When the spot market is unregulated –– there must be significant, regulated derivatives markets related to the underlying asset with which the Exchange can enter into a surveillance-sharing agreement.
Following the initial application denial, the SEC also rejected a petition by the Winklevoss twins last month, claiming that the record put before them did not support a conclusion that the cryptocurrency markets are “uniquely resistant to manipulation” as stated by the twins.
What it means for the cryptocurrency community
The news by the SEC to disapprove bitcoin ETFs is a big blow to the cryptocurrency community and the markets in general. The decision appears to have been reflected in Bitcoin’s price action, with bitcoin shedding around £233 (or $300 at the time of writing, around 4%) a few hours after the news surfaced.
If at least one of the Bitcoin ETFs would have been approved, then the crypto market would have seen a tidal wave of institutional investors, something that would have reflected on the prices in a long-awaited upward trajectory.
Many cryptocurrency experts have aired their views, with a good number of them claiming that the string of Bitcoin ETFs rejections by the SEC is provably wrong.
That said, many cryptocurrency enthusiasts believe that bitcoin will get through this challenge as it has proven to do in the past, especially considering its adoption is growing at a fast pace across the globe. Just recently, eToro, a multi-asset investment platform, entered into a deal with seven English premier league clubs to allow them to make payments to their players in bitcoin.