SEC to Review Latest Decision to Reject Nine Bitcoin ETF Applications

News and Analysis

The U.S. Securities and Exchange Commission said on Thursday, August 23, it will review a decision by its staff to block nine Bitcoin-based exchange-traded funds (ETFs) from coming to market.

ETFs are marketable securities that track an index, commodity, or basket of assets that are proportionately represented in the fund’s shares. ETFs experience price changes throughout the day as they are purchased or sold on a stock exchange. If the SEC allows a Bitcoin ETF, a fund would purchase an underlying amount of actual BTC and distribute those funds into shares, which further are distributed to shareholders.

As reported by ForkLog, on Wednesday the SEC rejected a total of nine inquiries from three companies – Proshares, GraniteShares and Direxion – to bring Bitcoin-based ETFs to market, claiming that the products did not comply with the requirements by 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.”

However, on Thursday the SEC’s Commissioner Hester M. Peirce published a copy of the document which says the Commission will review those decisions.

As SEC secretary Brent Fields wrote in a letter addressed to NYSE Group senior counsel David De Gregorio:

“This letter is to notify you that, pursuant to Rule 43 I of the Commission’s Rules of Practice, 17 CFR 20 I .43 1, the Commission will review the delegated action. In accordance with Rule 431 (e), the August 22 order is stayed until the Commission orders otherwise.”

“The Office of the Secretary will notify you of any pertinent action taken by the Commission,” Fields added.

Similar language was used in two others letters, including another sent to NYSE Group and Cboe Global Markets.

The letter does not give a timetable for when the Commission will make that determination though.

Last month, the SEC rejected an appeal for a Winklevoss BTC ETF fund by Bats BZX Exchange, Inc. The first application was rejected by the SEC in March 2017, because of “the largely unregulated nature of BTC markets.”

The next day Hester M. Peirce published a statement of official dissent from the agency’s disapproval of the Winklevoss fund appeal. Peirce argued that the SEC fundamentally erred with its latest decision and that the agency overstepping its “limited role,” when it focused on the characteristics of the underlying BTC market, rather than the derivative. She suggested that the disapproval order will likely “inhibit” the institutionalization of the BTC market.

Bitcoin reacted positively on the news, with its prices climbing above the $6,500 mark.

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