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SEC Says “No” to Winklevoss Bitcoin ETF

For four years, Cameron and Tyler Winklevoss, famous for their legal battle with Mark Zuckerberg, created and refined an exchange-traded fund that would track the bitcoin market and allow individual investors easier access to the digital currency. The two have advocated for bitcoin in the United States for yeas, and they have already made great progress in creating the Gemini Exchange, a market where traders can buy and sell bitcoin. The proposed ETF, named COIN, would track the price of bitcoin on this exchange.

The long-awaited Securities and Exchange Commission (SEC) decision regarding this bitcoin ETF arrived on March 10, and the news was disappointing for bitcoin enthusiasts everywhere who had hoped that the digital currency would gain a foothold in more mainstream financial markets. The SEC refused the application to create an ETF that would track the bitcoin market, or any cryptocurrency market for that matter. The SEC cited several reasons for the refusal of the ETF. Specifically:

The Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.

The SEC also noted that an exchange on which ETPs (Exchange-Traded Products) are traded must satisfy two major requirements. First, the exchange must have “surveillance-sharing agreements with significant markets for trading the underlying commodity,” and second, “those markets must be regulated.” Evidently, the SEC shares the same concerns with investors regarding the uncertainty, instability, and financial security of bitcoin.

The price of bitcoin plunged 15 percent on the announcement but has since rebounded to $1,237, slightly below pre-refusal price levels. The fluctuating price levels indicate that bitcoin investors are not terribly worried about the ETF denial, but prices over the next few weeks will hint at levels of investor confidence in the future of bitcoin.

Tyler Winklevoss commented on the SEC decision, “We began this journey almost four years ago, and are determined to see it through…We agree with the S.E.C. that regulation and oversight are important to the health of any marketplace and the safety of all investors.”

The decision is a setback for investors looking for cheap access to the bitcoin market, but as more firms and investors involve bitcoin in their business, the SEC and other regulators may take a closer look at the place of cryptocurrencies in the marketplace.

Read more from The New York Times.

Read more from Reuters.

Read more from the SEC’s ruling.

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