The Bitcoin price dipped below the $8,000 mark within hours of the SEC announcement that it has rejected a proposed Bitcoin ETF submitted by the Winklevoss Twins. This announcement was made after the SEC reviewed the application for the second time. The second time review was carried out after an appeal was submitted by Tyler Winklevoss and Cameron, Gemini co-founders. The initial application submitted by them was rejected on March 10, 2017.
The SEC highlighted that the Winklevoss’ modified sections of the application were problematic during the first round of review. With the revised application, the SEC performed a complete “de novo” review. This means that the regulators treated it like a fresh application.
Reason Behind The Rejection Of The ETF Proposal
The SEC, as a rule, follows the Exchange Act Section 6 (b) (5) while deciding whether to accept a new ETF or alternative investment. The reasoning that the SEC gave for rejecting the ETF proposal is that Bitcoin did not provide the safety against manipulation as an asset class. Also, the technology did not provide adequate tools for preventing money laundering and fraud. The Securities Exchange Act needs a rule modification owing to the complexities of blockchain technology. However, the onus of evidence for a rule change fell on the applicants in this case.
The applicants argued that the regulatory authority relied too much on other ETFs that they approved during the past and on surveillance agreements. The SEC, however, did not buy it. The SEC sounded hopeful by stating that Bitcoin market regulations are still in its early phases. They are keeping a watch on Bitcoin derivative markets to keep a tab on their popularity. According to CCN report, SEC is open to future applications that have sufficient modifications to support the surveillance agreement. The CBOE exchange also submitted an application earlier this month which it is still under review by the SEC.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]