The Winklevoss Twins are the latest to learn that the SEC does not want a Bitcoin ETF. Actually, this is the second time they learned this since their petition last year was also rejected.
Thus far, the SEC has stood firm in refusing any ETF that are cryptocurrency related to be approved. This is going counter to what appears to be the desires on Wall Street since many major firms are reported to be investing in trading desks.
According to their release, the main hangup from the SEC's perspective is the concern of manipulation. They believe that the Winklevoss Twins failed to prove that fraud and manipulation would be prevented by the rules established.
“Rather, the Commission is disapproving this proposed rule change because... BZX 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... in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.”
This is always an ironic twist consider all the fraudulent and manipulative activity the major banks engage in yet the SEC allows those markets to operate.
The other problem the SEC had with the petition is the fact that much of Bitcoin trading operates on unregulated markets. This ties into the concern that the pricing could be manipulated without recourse by the regulators.
”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.”
https://www.sec.gov/rules/other/2018/34-83723.pdf
SEC commissioner Hester M. Peirce chose to dissent from the Commission's decision. Instead, she believes that the rejection of this petition reaches far beyond the ETF arena. She asserted that the Commission is basically saying this technology is not welcomed in the markets.
Some are taking this as a positive sign for the cryptocurrency market. The fact that a sitting SEC commissioner took such a stance opens a window of opportunity. While the petition was rejected, the idea is that the mindset could be changing. This is the first sign that anyone of such standing within the SEC opined on the side of cryptocurrnecy acceptance.
It will be noteworthy to watch where things go from here. There are a number of other petitions in front of the SEC that they will consider. Eventually, it is hard to believe that these ETFs will not get approved. For the time being, the SEC stance is clear.
The cryptocurrency market finds itself at an interesting crossroad. It is an industry that was founded upon the notion of anti-government and borderless transactions. A large percentage of those involved has a rebellion mindset of some form. Whether it be the anarchists, homesteaders, alternative news crowd, or conspiracy theorists, the average crypto investor is not the run of the mill, watch CNN or ABC news and believe all that is stated.
Having Wall Street enter the equation provides conflict. This is one of the main factions that this crowd rebels against. Looking at them for future growth is ironic to say the least. Naturally, that is not to say that most of the people want Wall Street anywhere near the world of crypto. Nevertheless, that is not going to stop the money players from getting involved. They can sniff major profits coming.
