You are probably aware by now that the SEC have declined a further 9 bitcoin-based exchange-traded funds (ETF’s). This is a quick summary highlighting the decision’s made by the SEC, the reasons they have given so far for their decision and the remaining dates for the other pending bitcoin ETF proposals.
On August 23rd, 2018 the SEC disapproved 9 bitcoin ETF applications’ from three different companies. The 9 bitcoin ETF proposals were made up of; 5 from Direxion, 2 from ProShares and 2 from GraniteShares. All of the proposals were ‘derivative based’ and not back by physical bitcoins’. For each of the three disapprovals’ the SEC issued the same response:
“[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange 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 a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
The SEC has reinforced that all the proposals submitted so far have failed to demonstrate a “resistance to price manipulation” in a BTC derivatives market lacking in volume. The SEC has stated that:
“Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.”
The SEC did emphasise how their decision does not provide an insight into bitcoin or blockchain technology. Rather an insight into the markets and the risks which could occur.
”[The agency] 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.”
Because none of the proposals which were rejected intended on holding bitcoin as an asset. Rather they will have been backed by bitcoin futures. This may indicate that an ETF which is back by physical BTC rather than BTC derivatives could be more likely to be approved.
ETF Decisions | Upcoming Dates
The following are the dates of the remaining bitcoin ETF proposals.
Sep 7: Bitwise ETF First to Be Denied or Delayed
Sep 21: Direxion ETF Final to Be Approved or Denied
Sep 30: CBOE VanEck/ SolidX ETF 2nd to Be Approved, Denied or Delayed
The most anticipated decision is the one from CBOE VanEck/ SolidX, this was originally meant to be decided around a month ago. However, the SEC decided to delay their decision to late September. This caused the markets to drop further, however, they have stabilised since. The general feeling is that the decision will not be accepted, or at best be denied.
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