SEC Rejects Winklevoss’ Bitcoin ETF Bid

The Securities and Exchange Commission has denied a request to launch the Winklevoss Bitcoin Trust ETF, prompting bitcoin price to fall by 35% within a day.

Winklevoss Capital partners with a select number of early stage companies to provide investment with a full service approach to driving growth. Photo: Winklevoss Capital Management, LLC

Winklevoss Capital partners with a select number of early stage companies to provide investment with a full service approach to driving growth. Photo: Winklevoss Capital Management, LLC

Despite the optimistic expectations that bitcoin will soon become available on the stock market, the Securities and Exchange Commission (SEC) has denied approval of the first Bitcoin ETF. The agency cited regulatory uncertainty and the risk of fraud as main reasons for the rejection.

The decision comes almost four years since ETF was first proposed by bitcoin investors Tyler and Cameron Winklevoss. The fund is expected to simplify the process of investing in bitcoin without having to own the virtual currency.

Amid anticipated approval, bitcoin price surpassed the value of gold and hit a record high of over $1300 on Friday. But shortly after the commission announced its decision, the value of digital currency dropped to as low as 980%, showing a 35% slump during the day. It then rebounded slightly to more than $1100.

However, the value of bitcoin is still above the level it stood at a year ago. At the time of writing, it traded at $1200.

“As discussed further below, the Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest,” the SEC said in a statement.

According to the agency, a bitcoin ETF can’t be launched at the time due to the lack of regulation and high risk of fraud.

“The Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products (“ETPs”) must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter. First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated,” the SEC stated.

As Tyler Winklevoss told Forbes via email, they are still committed to bring bitcoin to the stock market and will continue working with the SEC staff. “We began this journey almost four years ago, and are determined to see it through. We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors,” he said.

Two other companies, SolidX and Grayscale Investments, are currently awaiting approval by the SEC to list their bitcoin ETFs on the stock market.

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