SEC’s Decision On Bitcoin ETF

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The Securities and Exchange Commission (SEC) of the United States (US) has published three releases (34-83904, 34-83912 and 34-83913) on Wednesday, August 22nd, 2018 rejecting the GraniteShares, ProShares and Direxion proposal to list a Bitcoin Exchange-Traded Fund (ETF).

The rule change requests were submitted on December 2017 and January 2018 by NYSE Arca (NYSE) and Cboe BZX Exchange (Cboe), which resulted in 9 ETF proposals being rejected. These decisions were scheduled for August 23rd, 2018, but the SEC published them one day in advance.

Three same comments on the three rejections

The three SEC publications of approximately 26 pages have practically the same text, with the difference of the parties involved and the proposal dates. These are the three most relevant phrases in the three documents:

“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.”

“The 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 Exchange has offered no record evidence to demonstrate that bitcoin futures markets are “markets of significant size.” That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary to satisfy the statutory requirement that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices”.

Bitcoin market reaction

On August 23rd, 2018, the market was waiting for the SEC’s decision, where it could be observed how the price of Bitcoin had risen by at least $400 due to the favorable expectations and comments made by SEC authorities previously. In short, the Bitcoin market has not reacted so badly because in the last three days at least it has risen in price by at least $100.

Bitcoin price on August 21 2018, source: coinmarketcap.com
Bitcoin price on August 22 2018, source: coinmarketcap.com

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