Published: Fri, July 27, 2018
Finance | By Gustavo Carr

Winklevoss Brothers Bitcoin ETF Rejected By SEC for Second Time

Winklevoss Brothers Bitcoin ETF Rejected By SEC for Second Time

The crypto markets retreated late Thursday after the U.S. Securities and Exchange Commission (SEC) once again rejected the Winklevoss Twins' attempt to list a Bitcoin ETF, citing concerns over fraud and manipulation of the digital currency.

That news sent the markets into a tailspin, as many analysts took it as an omen that the SEC is unlikely to approve any of the manifold cryptocurrency ETF applications now pending at the agency. Shortly after, Bats submitted a petition to review that decision, triggering another wave of comments - and expectation - about the agency's willingness to approve a cryptocurrency exchange-traded product.

The SEC released a filing on its decision, stating that the arguments put forward by BZX to justify the safety of the funds are not sufficient to eliminate fears of price manipulation.

"This "overbought" condition becomes a bearish signal when a new high in price does not coincide with a new high in the RSI", for Bitcoin, said Craig Erlam, senior market analyst at online trading firm Oanda London.

Pierce also holds that the SEC fails to interpret the statutory standards properly, basing its decision on the underlying Bitcoin 00 spot market rather than the ETP shares of the Winklevoss Bitcoin Trust to be listed on the exchange.

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"More institutional participation would ameliorate numerous Commission's concerns with the bitcoin market that underlie its disapproval order", she wrote in a statement, adding that the decision "sends a strong signal that innovation is unwelcome in our markets". An official dissent to the ruling has even been registered - effectively arguing that Bitcoin is being unfairly singled out for over-regulation.

"BZX has not met its burden under the Exchange Act and the Commission's Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6 (b)(5), in particular the requirement that its rules be created to prevent fraudulent and manipulative acts and practices", a document outlining the SEC's rationale reads.

Following the SEC's decision, which sharply drove the price of Bitcoin down from $8,287 to about $7,900, the SEC published Commissioner Hester Peirce's dissent from the SEC's decision. The SEC reportedly followed Exchange Act Section 6 (b)(5) when they were taking the decision of whether to accept it or not.

The Commission emphasizes that its approval does not rest on an evaluation of whether Bitcoin or blockchain more generally has utility or as an innovation or an investment, the agency stated.

"In disapproving the proposed listing, the Commission points to problems in the bitcoin market that I believe would be mitigated by institutionalizing the market-a phenomenon that bitcoin ETPs would foster".

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