Last Thursday, July 26th, the SEC filed an official rejection of the proposed rule change in the Bitcoin-ETF filed by the BZX exchange seeking to list and trade shares of the Winklevoss Bitcoin Trust. As was previously reported by CoinSpeaker, the SEC reasoned this rejection stating that the proposed rule changes were not “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.”
However, the SEC clearly stated that this ruling is not against Bitcoin and its supporting blockchain technology:
“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.”
Moreover, the SEC in its document has also mentioned that it would be open to considering future proposals, provided they are in line with the agency’s regulatory rules. However, the pessimism connected with the decision was short lived and Bitcoin is now seen trading well above $8000. At the press time, Bitcoin is trading at $8157, according to CoinMarketCap.
However, the crypto community of agitated over the reporting of a majority of news outlets, which caused the price swings. As in the SEC document, the proposed rule change was rejected first by the commission back last year, but the BZX exchange had requested for a review from a delegated authority, to which the SEC had given the permission. The latest rejection was basically after the second time review request from BZX for the Bitcoin ETF which was filed by Winklevoss Twins two years back in 2016.
Twitter Crypto Community Responds to The Latest News on Bitcoin ETF Rejection
After the crypto community dug into the matter of the latest SEC ruling, things got pretty clear. Nevertheless, the damage was already done. Here are some of the reactions from the Twitter Crypto Community.
The Winklevoss ETF was an appeal from a 2 year old application with a 1 year old denial. The initial denial was bc of lack of regulation/security. The addition in the appeal was that “Bitcoin is hard to manipulate” for a variety of reasons (which I agree with). (1/N)
— Crypto Quantamental (@CryptoQF) July 26, 2018
Some also accused the publications like CNBC and Bloomberg for manipulating the crypto market.
@SEC_Enforcement please check this market manipulation.
— Red-A ⚡️ (@REDA31) July 26, 2018
WOW we really have to do something about #Bitcoin fake news sites
why have they all come out saying Winklevoss twins ETF rejected together when we already new they'd been rejected an THAT ISN'T THE ETF WE'RE WAITING FOR is that CBOE SolidX ETF?? NO they trying to lower the price pic.twitter.com/dHYUPKkdSD
— Orbitcoin (@Orbitcoin) July 27, 2018
A Tweet from Tim Swanson takes a sharp sting to early reactors like Jameson Loop.
SEC: here is a 92 page detailed explanation for why we rejected this ETF… and suggestions on how to improve the underlying market in the future.
Bitcoiners: we don't have time to read it or fix things because we are too busy pushing fortune cookie memes on Twitter. Such as: https://t.co/w5nkfi5OHY
— Tim Swanson (@ofnumbers) July 27, 2018
However, many in the market seemed to be confusing the Bitcoin ETF rejection of Winklevoss Twins with the latest Bitcoin ETF filed by the CBOE exchange through the Vaneck Solidx Bitcoin Trust (“the Trust”). Investment firm VanEck and financial service company SolidX have jointly applied for the Bitcoin ETF on behalf of CBOE after several previous failed attempts. Meanwhile, SEC has received an overwhelming public opinion to proceed with the Bitcoin ETF.
Selling bitcoin because you expected Cboe ETF to be approved but Winklevoss ETF got rejected is like selling Twitter shares because Facebook plunged 22%.
Those two are not the same!
— Joseph Young (@iamjosephyoung) July 26, 2018
While some were much inclined on asking what is stopping SEC from granting Bitcoin ETF to long-established crypto players like Gemini if they can consider the Bitcoin ETF from VanEck.
Really great question!!
First, yes. The timing is important. But also, the VanECk ETF is a much more mature product that includes full insurance, is built specifically for institutional investors( professional clients) and is backed by the CBOE. https://t.co/xm7soPDyMX
— Mati Greenspan (@MatiGreenspan) July 27, 2018
This is old news, While I think Cameron and Tyler would have run one of the better ETF's, The new ETF excitement came from the fact that CBOE filed their own Bitcoin ETF. The SEC would rather grant an ETF to an existing institution over a new one. https://t.co/xLHZDLo9O5
— Charlie Shrem (@CharlieShrem) July 26, 2018
A major twist in the plot came after SEC Commissioner Hester Peirce expressed dissent on SEC’s decision on the rejection of Winklevoss Bitcoin ETF. In an official public statement, Peirce expressed her disappointment strongly emphasizing that Bitcoin is both mature and regulated enough to be considered for products like Bitcoin ETF. Peirce tweeted:
Apparently, bitcoin is not ripe enough, respectable enough, or regulated enough to be worthy of our markets. I dissent: https://t.co/gH5zXaKtmj
— Hester Peirce (@HesterPeirce) July 26, 2018
In the official public statement, Peirce also noted:
“Bitcoin is a new phenomenon, and its long-term viability is uncertain. It may succeed; it may fail. The Commission, however, is not well positioned to assess the likelihood of either outcome, for bitcoin or any other asset. Many investors have expressed an interest in gaining exposure to bitcoin, and a subset of these investors would prefer to gain exposure without owning bitcoin directly.” She also added: “the disapproval order demonstrates a skeptical view of innovation, which may have an adverse effect on investor protection, efficiency, competition, and capital formation well beyond this particular product.”
VanEck Responds To SEC’s Staff Letter Addressing the Agency’s Concerns
Earlier this month on July 20th VanEck responded to the SEC’s Staff Letter while addressing in detail many of the agency’s concerns to Bitcoin price manipulation, fraud and other things. Last year, the SEC rejected VanEck Vectors Bitcoin Strategy ETF, a futures-based bitcoin ETF citing multiple concerns for cryptocurrency-related investment funds like liquidity, valuation, custody, potential manipulation, arbitrage and other things.
In their response, VanEck has provided a detailed explanation into each of these concerns stating how they have addressed them and saying that the latest ETF filing is consistent with the SEC laws. VanEck writes:
“We believe these concerns have appropriate answers […] moreover, by offering investors exposure to bitcoin through a regulated investment product, we believe the proposed ETF will be consistent with the Securities and Exchange Commission’s […] mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” It further adds: ” …By offering investors exposure to bitcoin through a regulated investment product, we believe the proposed ETF will be consistent with the Commission’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”
VanEck also believes that the arrival of Bitcoin ETF could considerably reduce market manipulation stating:
“Given the proposed ETF’s regulation under the Securities Act of 1933 and 1940 Act and the fact that it offers exposure via regulated and surveilled bitcoin futures, we reasonably expect the proposed ETF to reduce potential manipulation and operational risk associated with a bitcoin investment product.”
Nonetheless, despite all the emerging challenges VanEck doesn’t seem to be close to dropping out of the game, noting that it is still interested in launching a futures-based Bitcoin ETF.