In one of the previous articles, we discussed the potential stance the Securities Exchange Commission would take on the founding of bitcoin exchange-traded funds (ETFs). On the 22nd of August, the SEC gave its ruling for the first batch of eight Bitcoin ETF proposals: the Commission rejected all of them.
The regulating body of the US capital market had been postponing a definite decision of various filings for Bitcoin ETFs since the beginning of the year. At the beginning of August, the SEC announced the postponed deadlines for ruling over a group of nine bitcoin ETFs proposals.
The Timeline of SEC’s Decision Making Process
The 23rd of August was the first set deadline for two funds created by ProShares, to be followed by deadlines for the Bitcoin ETFs created by Direxion and GraniteShares in September. However, the Securities Exchange Commission included all these Bitcoin ETFs in its first ruling.
SEC’s rejection applies to two ETFs founded by ProShares which were created to track Bitcoin future contracts, one ETF by GraniteShares and five leveraged and inverse ETFs created by Direxion.
This is not the first time the Securities Exchange Commission rejects the founding of a Bitcoin exchange-traded fund. In July, the Commission rejected a proposal made by Winkelvoss – in this case, the ETF would have traded physical bitcoins.
Bad Tidings for the Other Bitcoin ETFs Awaiting SEC Ruling?
Just like in the case of the negative ruling given to the Winklevoss ETF proposal, the Securities Exchange Commission expressed its concerns over potential frauds and the manipulation of the Bitcoin markets.
This repeated concern is not likely to be thwarted in the coming weeks, when other bitcoin ETFs proposals reach their deadline for a final ruling from the SEC. The rejection of the proposals made by Direxion, ProShares and GraniteShares explains that the filings made by these companies do not meet the SEC requirement “that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices”.
Apart from this lack of confidence in the supervision mechanisms of this emerging market, the Commission also stated that it is not mature enough to be eligible for ETF approval. The text of the latest ruling clearly states that, according to the members of the SEC, “the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are markets of significant size.”
Whether the stance taken by the Securities Exchange Commission will be maintained for the next batch of bitcoin ETF proposals – like the VanEck SolidX Bitcoin Trust, which will receive a ruling on 30 September – is yet to be seen, especially since it has been announced on 23 August that the rejections will be reviewed.
In English: the Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff’s action, as will now happen here.
— Hester Peirce (@HesterPeirce) August 23, 2018