The much awaited verdict on the bitcoin exchange-traded fund (ETF) comes as a disappointment for the Winklevoss twins as the US Securities and Exchange Commission has rejected their proposal on grounds that it was susceptible to manipulation.
The decision brings an end to Cameron and Tyler Winklevoss's quest that began in 2013.
Stating the reason for turning down the proposal the SEC said: "As discussed further below, 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 Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products (“ETPs”) must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter."
Post the news, the price of bitcoin went downhill to USD 1,022, as per the CoinDesk Bitcoin Price Index (BPI).
However, the digital currency remains resilient and has climbed back close to USD 1,200.
The fact that the surveillance on the unregulated bitcoin ledger is tough seems to bother the SEC as well.
"First, the exchange must have surveillance -sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated," the SEC notice said.
Hard to argue with the SEC's bitcoin logic. To Bitcoin traders being unregulated is a feature. To the SEC it's a bug.— Dave Nadig (@DaveNadig) March 10, 2017
Despite the negative verdict, Tyler Winklevoss said that he remains optimistic and committed to bring the COIN to the market.
"We began this journey almost four years ago, and are determined to see it through. We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors," he said.
Expressing his opinion, Saurabh Agrawal, CEO, Zebpay told Moneycontrol that the Winklevoss ETF got rejected by SEC mainly because of surveillance issues and unregulated over the counter (OTC) markets of bitcoins worldwide.
"We believe that getting ETF approval would have been a landmark moment for bitcoins, rejection, however, doesn't necessarily change anything. The growth, the development and the use cases still exist and there are already other ETF's which have filed for approvals," Agrawal said.
The SEC believes that regulated bitcoin related markets will develop over time and is willing to approve or introduce ETFs in the future that complies with the requirements of the Exchange Act, he said.
"We will wait for the right time," he added.
NOT ALL IS BAD NEWS
Despite the SEC curveball not all news is bad for the cryptocurrency.
Earlier this week, the People’s Bank of China’s (PBoC) business management department director Zhou Xuedong said in an interview that the country's regulators should adopt a forgiving attitude towards exchanges and not be prohibitive for the time being.
He further revealed the short and long term plan of PBoC for the bitcoin exchanges.
After the crackdown on Chinese exchanges in early January, bitcoin price went below levels of USD 800 and this soften tone comes at an opportune time when the pros and cons of the digital currency is being debated globally.
"There is a significant risk, one is the risk of customer funds security; the second is the risk of money laundering; third is the risk of leveraged transactions," he said.
Zhou Xuedong further said that in addition to some platforms there are publicity non-compliance, technical security risks and platform associated business risk.
The domestic currency trading platform should be inclusive of technological innovation, not banned, leaving a period of observation, but in the short term must be clear that currency trading platform to monitor the red line under strict supervision, Zhou Xuedong told Chinese media outlet Caixin.
the ETFs dont add to #bitcoin utility, they give passive investors an easier way to buy the future potential, though lacking bearer property— Adam Back (@adam3us) March 10, 2017
"It is a welcome move by PBOC. Adopting a forgiving attitude is a very wise step and will lead to many positive developments in Chinese Bitcoin ecosystem. It will also rebuild the confidence in Chinese User for digital currencies,” Saurabh Agrawal said.
Yesterday, the currency also peaked at USD 1,325.81 (a new all-time high), as per the CoinDesk Bitcoin Price Index (BPI) before falling back below levels of USD 1,200.
While filing this report the price of bitcoin was at an average of USD 1,188, according to BPI index.
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