Citing fraud and market manipulation concerns, the US Securities and Exchange Commission (SEC) on Wednesday rejected the listing of nine Bitcoin-related exchange-traded funds (ETFs) proposed by ProShares, Direxion Asset Management, and GraniteShares and meant to be traded on the New York Stock Exchange (NYSE) and Chicago Board of Options Exchange (CBOE). The cryptocurrency market reacted immediately, with headliner Bitcoin dropping to as low as $6,310 before recovering slightly to $6,450 as at 6:46 UTC, still nearly 4% down on a daily basis.
“[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 said in threeseparateorders.
The agency noted 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”.
Two of the ETF proposals in question were submitted in September 2017 by ProShares and two by GraniteShares in December 2017. The remaining five applications were filed by Direxion in January 2018. If given the green light, the ProShares and Direxion funds would have been listed on the NYSE Arca platform, while GraniteShares ETFs would have been traded on CBOE's Bats BZX Exchange.
The rejections come after last week the SEC for a second time refused to give its stamp of approval to the Bitcoin ETF proposed by the famous billionaire twins Cameron and Tyler Winklevoss. In a rare move of public dissent in the SEC, one of the Commissioners, Hester Peirce, publicly revealed her objection to the regulator’s decision, saying that the commission ruling is against consumer securities and innovation as the Winklevoss’ second ETF proposal fulfils federal legal provisions.
While the SEC has not yet approved any cryptocurrency-based ETF, two other key applications are awaiting the agency’s decision next month. In June, investment firm VanEck partnered with blockchain startup SolidX to submit a proposal for a Bitcoin ETF to be traded on CBOE's Bats BZX Exchange. Last month, Bitwise Asset Management also applied with the SEC to list an ETF.