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SEC Disapproves Winklevoss Bitcoin ETF: What Next?


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The Securities and Exchange Commission has forbidden an application by the Winklevoss brothers to come up with a bitcoin ETF, finding the product not safe enough for investors. The SEC said that it cannot "conclude that bitcoin markets are uniquely resistant to manipulation ."

Bitcoin dropped about 6% to the level of $7,922 on Jul 27 from the one-week high of $8431.88 recorded on Jul 25 due to the rejection news, as per data from condesk.com. Bitcoin prices have been gathering steam in recent weeks on rumors that the SEC could give a nod to a bitcoin ETF as early as August (read: Is Bitcoin Surging on ETF Approval Prospects? ).

This is the second time the SEC is rejecting a bitcoin ETF proposed by Cameron and Tyler Winklevoss. Last year, the SEC said no to an applicationfor the "Winklevoss Bitcoin Trust," but in June, the group submitted a proposed rule change.

Why Such Stringency?

SEC is worried about its extreme price volatility in cryptocurrencies and liquidity in bitcoin-related funds. Per Reuters, the virtual currency can be deployed to quickly move money anywhere in the world without any central authority intervention, such as a bank or government. A fund holding the currency could draw more investors and materially boost its price.

Several central banks issued warnings against it.South Korea, which makes up about 20% of global bitcoin trading, created a government department last week  targeted at formulating policy initiatives  around financial technology and cryptocurrencies.

The Chinese government also clamped down on initial coin offerings (ICO). The Reserve Bank of Australia sees it as "speculative mania" and finds bitcoin more popular in the illegal economy, not among consumers.

Several Filings on the Way

In the past several months, many issuers tried to launch a bitcoin ETF. Among the latest expectants,Bitwise Asset Management filed (this July) for an index fund that intends to follow the performance of a basket of the 10 largest cryptocurrencies.

Another money management firm VanEck made renewed efforts for a bitcoin exchange-traded product launch, forming a pact with blockchain company SolidX. But, this week, the SEC delayed discussions on five bitcoin ETFs filed by NYSE Arca. With Winklevoss rejection, we see tough luck for other companies (read: No Bitcoin ETFs in 2018? ).

Try Blockchain ETFs Till Bitcoin ETF Comes Our Way

There are Blockchain ETFs available in the market, namely  Reality Shares Nasdaq NexGen Economy ETF  BLCNAmplify Transformational Data Sharing ETF  BLOK and  First Trust Indxx Innovative Transaction & Process ETF  LEGR . These funds look to track a portfolio of stocks from companies that are deemed to have strong exposure to blockchain technology development. But issuers are not allowed to use the word "blockchain" in the name (read:  Forget Bitcoin, Bet on Blockchain With These New ETFs ).

As per a source, "the  blockchain in Bitcoin  literally acts a ledger; it keeps track of the balances for all users and updates them as money changes hands." So, if investors are not getting a bitcoin ETF now, they can definitely be in touch with the concept through blockchain ETFs.

Though there are no bitcoin ETFs on the U.S. market right now, Bitcoin Investment Trust (GBTC) is similar to an ETF and trades over the counter , as quoted on barrons.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , ETFs
Referenced Symbols: BLOK , BLCN , LEGR



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