The SEC Rejects a Bitcoin ETF, Again
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Friday, July 27, 2018

The SEC Rejects a Bitcoin ETF, Again

Cryptocurrency enthusiasts, fundsters, and FAs who are eagerly awaiting a bitcoin ETF got some bad news yesterday afternoon. They'll have to keep on waiting for such a product to hit the market, as a key regulator still isn't on board.

Cameron and Tyler Winklevoss
By a vote of three to one, the SEC commissioners have yet again rejected (via a 92-page order) the Bats/CBOE proposal to list and trade shares of the Winklevoss Bitcoin Trust (from the Winklevoss twins of Facebook fame). In short, chairman Jay Clayton (R) and commissioners Kara Stein (D) and Robert Jackson (D) still worry that bitcoin is vulnerable to manipulation and fraud, despite Bats/CBOE's insistence to the contrary.

As per usual, even outside the online crypto buzzsphere, a host financial publications picked up the news, including: Barron's, MarketWatch, Reuters, and the Wall Street Journal.

One commissioner, Hester Peirce (R), dissented, arguing that the SEC should allow the Winklvoss bitcoin ETF to launch and trade, and Crypto Asset Management founder Tim Enneking tells MarketWatch that Peirce's support is "quite heartening" and the first time anyone at the SEC has taken a positive step regarding a bitcoin ETF. So, yay baby steps?

The other three commissioners made very clear that they're not attacking bitcoin completely, and they seemed to leave the door open to allowing bitcoin ETFs in the future. Indeed, Reuters notes that there are at least five other bitcoin ETF proposals under review at the SEC. The Winklevoss one falls under the Exchange Act, while others fall under the Investment Company Act, and the SEC's investment management division under Dalia Blass is calling for industry and public input on the issue, then sharing that feedback publicly.

One note worth remembering: SEC review is not like a criminal case. The burden of proof when making a proposal like this falls on the proposer, not on the skeptics, which makes getting outside-the-box products (like a bitcoin ETF) approved something of a big hurdle.

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