Winklevoss Brothers Face Second Time Rejection For Their Bitcoin ETF
This is for the second time that Winklevoss Brothers have been facing rejection for their Bitcoin ETF by the U.S Securities and Exchange Commission (SEC). After facing rejection last year, the Gemini exchange founders had applied for Bitcoin ETF and wanted to secure the Winklevoss Bitcoin Trust on BATS Global Market’s BZX stock exchange with its latest filing in June.
According to the SEC report published on July 26, Thursday, the ETF filing was curbed with a 3-1 vote where SEC noted that the filing has not met with the requirements of the Exchange Act and the commission’s existing guidelines. Moreover, the agency clarifies that its decision should not be taken as a judgement against cryptocurrencies or the blockchain technology, but instead it is based on the structure of the proposal that was pitched.
The SEC document notes: “Although the Commission is disapproving this proposed rule change, the Commission 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. Rather, the Commission is disapproving this proposed rule change because, as discussed in detail below, 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 Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.”
What seems from the SEC’s comments is that the nonconformity in regulations across the globe has caused SEC to arrive at this decision. The agency argues that a majority of Bitcoin trading occurs outside the ambit of United States regulatory bodies. Considering cryptocurrencies as an international trading asset, the SEC says that there is no guarantee in order to protect investors against fraud and manipulation.
The SEC notes that BZX needs to mitigate these concerns and would need to “enter into surveillance-sharing agreements with, or hold Intermarket Surveillance Group membership in common with, at least one significant, regulated market relating to bitcoin” as“such agreements provide a necessary deterrent to manipulation because they facilitate the availability of information needed to fully investigate a manipulation if it were to occur.”
Earlier this year at the World Economic Forum 2018, IMF chairman Christine Lagarde called for international cooperation on cryptocurrency regulations. It seems that the SEC comments recently again reiterate these views. Moreover, the G20 member countries have been working rigorously over the past few months to establish a common regulatory framework and structure.
However, the SEC has left its options open for approving such products in the future noting that "over time, regulated bitcoin-related markets may continue to grow and develop."
Just three days back, Bitcoin climbed the $8000 mark after a huge optimism strikes the market regarding SEC’s approval of the CBOE Bitcoin ETF. However, with the latest rejection, the world’s largest cryptocurrency has corrected below $8000.