The Winklevoss twins appear to have hit a bit of a roadblock in the crypto world. The US Securities and Exchange Commission (SEC) declined their application for a Bitcoin ETF for the second time late last night. The price of Bitcoin immediately felt the effects of the negative decision from the SEC, falling from $8300 to $7888. The twin’s proposal for a Bitcoin ETF was first declined back in March 2017, but they challenged the decision and resubmitted their proposal. This fresh proposal marks another loss for the infamous twins and comes as quite a surprise after winning their seventh crypto patent only a month ago.
Offshore Manipulation Fears
Despite the changes to the proposal submitted by the twins and the BATS exchange, it all proved to be not enough in the end. The SEC cited that the exchange had not implemented the ability to prevent manipulative trading and that Bitcoin is mainly traded on unregulated overseas platforms – opening the door to mass manipulation out of the SEC’s control. However, the SEC did note that it isn’t completely writing Bitcoin or blockchain technology off, it just feels markets around the globe need to become slightly more regulated to prevent market manipulation.
In a release on the SEC website, it outlined the reason for the decision, “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. While the record before the Commission indicates that a substantial majority of bitcoin trading occurs on unregulated venues overseas that are relatively new and that, generally, appear to trade only digital assets, and while the record does not support a conclusion that bitcoin derivatives markets have attained significant size, the Commission notes that regulated bitcoin-related markets are in the early stages of their development.”
ETF Providers Still Have a Chance
On Wednesday, the SEC postponed a hearing on Direxeon’s proposal for five Bitcoin ETFs, meaning that once they reconvene on September 21st there is still a chance they could approve it. It makes little sense to postpone a decision for 60 days only to decline it, especially if they already knew they would be declining a similar ETF one day later. Direxeon needs to use this additional time to shore up any possible faults, prepare for questions surrounding offshore market manipulation and come up with a solution to it as well. In addition to Direxion’s ETF hearing, The Chicago Board Options Exchange (CBOE) is due to hear back about its application for a Bitcoin ETF in the coming weeks. However, given recent form, some industry experts are predicting this will also be postponed.
America Needs its Own Bitcoin ETF
Europe has had several Bitcoin ETFs for quite some time now, and America is playing catch-up. American institutional investors are clamoring for a Bitcoin ETF, as they make the investment process more secure and regulated. Every time an American Bitcoin ETF gets declined by the SEC we are likely to see a dent in Bitcoin’s prices, which could trigger negative sentiment in the market. However, even if only one Bitcoin ETF gets the SEC’s approval we could witness a huge bull run – to the moon! All eyes are on the SEC and their next Bitcoin ETF decision.