US SEC rejects Winklevoss brothers' bitcoin ETF again, keeps doors open for crypto-derivatives in future

The US Securities and Exchange Commission (SEC) has rejected the proposal for a rule change which would have led to the listing of Tyler and Cameron Winklevoss-led exchange traded fund based on bitcoin price movements.

The rejection comes a year after SEC had turned down a rule change request from the Bats BZX Exchange which sought to list and trade shares of the Winklevoss Bitcoin Trust. The Bats requested a review of the order leading to another wave of expectations from investors that the SEC may accept a cryptocurrency based derivative.

However, the SEC reiterated the concerns it had raised in its previous order as per the order published on Thursday.

The regulatory authority highlighted that the order should not be seen as a judgment against cryptocurrencies and blockchain. It pointed out that the rejection was solely based on the discrepancies in the structure of the proposal.

"Although the Commission is disapproving this proposed rule change, the Commission emphasises 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,” the SEC said in its report.

“Rather, the Commission is disapproving this proposed rule change because, as discussed in detail below, BZX 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 its rules be designed to prevent fraudulent and manipulative acts and practices."

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The statement means that the SEC is open to cryptocurrency or blockchain based investment products in the future if the safeguarding of investors interests is ensured.

"For example, existing or newly created bitcoin futures markets may achieve significant size, and an ETP listing exchange may be able to demonstrate in a proposed rule change that it will be able to address the risk of fraud and manipulation by sharing surveillance information with a regulated market of significant size related to bitcoin, as well as, where appropriate, with the spot markets underlying relevant bitcoin derivatives," SEC added.

Following the order, the bitcoin price dived about 4 percent to trade below USD 8,000. The cryptocurrency had touched the mark on Tuesday for the first time in two months.