by Nuno Menezes
The Securities and Exchange Commission Agency (SEC) turned down a proposal to allow the creation of an exchange-traded fund for bitcoin earlier in March, however, on March 23, the Bats BZX exchange announced it would appeal the decision.
The bitcoin price was increasing steadily until the Agency decision made it go crashing down. It seems that the agency turned down the proposal because it saw that the possibility of fraud was too high. The agency went on stating that the proposal was missing the requirements needed for a “national securities exchange to be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”
The decision immediately had a significant impact on bitcoin, causing the price of the digital currency to plunder down. The price had previously hit the $1,300 level, but right after the SEC released its decision on March 10, it fell steeply to a fresh low around $975.
The Winklevoss brothers and their Winklevoss Bitcoin Trust first applied for SEC approval about four years ago. With this proposal, Tyler and Cameron Winklevoss were hoping an exchange-traded Bitcoin product would make the cryptocurrency a lot more attractive to Wall Street and retail investors. Unfortunately, the SEC did not agree with that. The SEC ruling had a terrible adverse influence on bitcoin because the creation of the ETF would have paved the way for institutional investors to come in and would allow for retail investors to buy bitcoin in a much simpler way.
Needless to say, the Bitcoin ETF proposal was not the only proposal made to the SEC. Other companies have made similar proposals for Bitcoin traded funds, including one proposal that calls for the digital assets underlying the ETF to be insured. So, there is still a chance we might see the Agency likely to grant approval since there would be less risk of harm for ordinary investors. But even so, the Agency decision suggests the SEC is still strongly skeptical when it comes to accepting the digital currency.
Bats, a leading US Stock Market operator says it is planning to petition the Commission to try and make the Agency revert its position. Bats operates four stock exchanges in the U.S. – BZX Exchange, BYX Exchange, EDGA Exchange, and EDGX Exchange. The BZX Exchange (originally called Bats Exchange) became a registered national securities exchange in October 2008. The BYX Exchange was launched in October 2010 providing an additional liquidity pool for traders to access. In 2014, Bats merged with Direct Edge, a U.S. equities market operator that operated the EDGX and EDGA Exchanges. The combined Bats Global Markets enterprise is now the largest U.S. equities market operator on any given day.
It is not clear if there is any mechanism requiring the Commission to act on such a petition, but at least this is very positive for bitcoin since it proves that Institutional Investors still have their eyes fixed on the potential of the digital currency.