DA CAPO: SEC REJECTS NINE PROPOSALS FOR BITCOIN ETF’S

SEC rejects 9 proposals for bitcoin ETF

The US regulatory authority SEC has again rejected applications for Bitcoin ETFs. This time nine applications from three applicants. The SEC reiterates that the crypto markets are susceptible to fraud and manipulation and that the applicants have not provided appropriate safeguards.


A few hours ago, Reuters reported that the U.S. Securities and Exchange Commission (SEC) again rejected applications for approval of Bitcoin ETFs. This time nine applications filed by the three companies ProShares, GranitShares and Direxion were rejected. The rejection was no surprise for the market even if the requested Bitcoin ETF’s were designed by well known ETF’s providers. The BTC price lost less than 3% over the last 24 hours.

In all rejections, the SEC once again emphasized the primacy of investor protection and re-presented its concerns regarding fraud and manipulation in crypto markets. Additionally, ProShares wanted to set up an ETF to track the bitcoin futures market and would have failed to demonstrate that the bitcoin futures market was significant in size at all and could, therefore, function efficiently and without manipulation.

The three applicants could not convince the SEC that they could establish rules and surveillance procedures to avoid market manipulation and fraud. As in the case of the rejected WINKLEVOSS ETF, the SEC’s concerns focus on the lack of regulated and manipulation-free marketplaces (read here our short analysis on Crypto-ETF and SEC). In WINKLEVOSS case, the SEC noted that the exchange that would have listed their fund failed to prove the underlying market was “resistant to manipulation”.

However, the SEC expressly emphasized that the rejection of the ETFs would not constitute an evaluation of cryptocurrencies and blockchain technologies:

The commission 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

In our opinion, the most promising application for approval is that for the VanEck SolidX Bitcoin Trust. This application will be decided by the SEC on September 30, 2018. We are cautiously optimistic about SEC approval, as the application was filed by the Chicago Cboe BZX Exchange (“BZX”) and offers an excellent environment. It is already the third attempt of the renowned New York-based VanEck Group and according to insiders, this time they are almost certain to get the SEC approval. The VanEck Group currently manages more than USD 47 billion assets under management (AUM), making it one of the larger international ETF providers. The firm currently manages assets on behalf of more than 400 institutions, including endowments, foundations, hospitals, pensions, and private banks.

For the time being, however, we still have to wait and hope.