US SEC Commissioner Dissents From Agency's Rejection of Winklevoss Bitcoin ETF

U.S. Securities and Exchange Commissioner Hester M. Peirce has published a statement of official dissent from the agency's second disapproval of the Winklevoss brothers' application for a Bitcoin exchange-traded fund yesterday, July 26.

"The Winklevoss' Bats BZX Exchange, Inc. had filed a proposed rule change with the SEC in June 2016 to allow it to list and trade shares of a Bitcoin ETF called the Winklevoss Bitcoin Trust, which was rejected by the agency in March 2017. Following the disapproval of the initial proposition, the group filed a petition seeking"review of the disapproval by delegated authority, which the SEC formally rejected Thursday, July 26.

Referring to the most recent rejection, SEC Commissioner Peirce argued that the SEC has fundamentally erred with its latest decision on three grounds.

"The Commission erroneously reads...the Act, which requiresthat the rules of a national securities exchange be 'designed to prevent fraudulent and manipulative acts and practices' [It] focuses its decision not on the ETP shares to be listed ...but on the underlying bitcoin spot market.[instead of] the ability of BZX...to surveil trading of and to deter manipulation in the ETP shares listed and traded on BZX.".

She reinforces her point by adding that the "Concerns underlying the [SEC] disapproval order go to the merits of bitcoin [itself] as an investment," and that "If the disapproval order's rigorous standard were applied consistently, many [other] commodity-based ETPs would be in peril, as rumors of manipulation plague many commodity markets."

"When we do finally approve an ETP on bitcoin...investors may reasonably - but incorrectly - conclude that the investment carries with it the SEC's imprimatur because the Commission has performed due diligence on the underlying market and, through its approval, is certifying the quality of that market."

" precludes investors from accessing Bitcoin through an exchange-listed avenue that offers predictability, transparency, and ease of entry and exit.

They] will be relegated to the spot market, which will not benefit from the increased institutional discipline that approval of this product would bring.

Cryptocurrency markets took a sharp tumble today in response to news of the SEC's disapproval, seeing a dizzying $12 billion wiped from total market capitalization.

On July 24 the SEC delayed its decision on a separate Bitcoin ETF application from investment firm Direxion, the same day as digital asset manager Bitwise filed its own application with the regulator for an ETF that would track an index of ten cryptocurrencies.