US SEC Commissioner is not Buying the Rejection of Winklevoss Bitcoin ETF
The U.S. Securities and Exchange (SEC) has on July 26 rejected the application by the Winklevoss brothers for a Bitcoin exchange-traded fund (ETF). This has somewhat affected the price of the crypto market in the last 24 hours. However, Hester M. Peirce, who is the Commissioner of the agency has published a statement that is contrary to what the agency thinks.
In 2016, the Winklevoss Bats BZX Exchange, Inc. filed for a change of rule with SEC. This change would allow it list and trades shares of Bitcoin ETF. Sadly, their application was rejected in March 2017. Not satisfied with the disapproval of their application, the duo filed a petition demanding for a review of the disapproval. Once again, the SEC rejected their application formally on Thursday 26 July.
One of the members of the Commission, Peirce believes that the regulatory agency was somewhat wrong in their decision. She argues that the agency has overstepped its jurisdiction by focusing on the features of the underlying Bitcoin market, instead of what the exchange is seeking to list. She noted that:
“The Commission erroneously reads…the [Securities Exchange] Act, which requires…that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices…’ [It] focuses its decision not on the ETP shares to be listed …but on the underlying bitcoin spot market… [instead of] the ability of BZX…to surveil trading of and to deter manipulation in the ETP shares listed and traded on BZX.”
She also noted that by rejecting the application, the SEC is setting a risky precedent because investors may assume that since the SEC chooses which ETP to approve they may have performed due diligence and at such other approved projects are safe to invest in.
“When we do finally approve an ETP on bitcoin…investors may reasonably — but incorrectly — conclude that the investment carries with it the SEC’s imprimatur because the Commission has performed due diligence on the underlying market and, through its approval, is certifying the quality of that market.”
The disapproval will also hinder the institutionalization of the crypto market, considering the fact that regulatory bodies are trying to step in.
“[The disapproval] precludes investors from accessing Bitcoin through an exchange-listed avenue that offers predictability, transparency, and ease of entry and exit… [they] will be relegated to the spot market, which will not benefit from the increased institutional discipline that approval of this product would bring.”