The Securities and Exchange Commission (SEC) has rejected the latest ETF application from Bitwise Asset Management citing concerns over market manipulation and potentially fraudulent activities within Bitcoin markets. The application, made in January and twice delayed, leaves one ETF application remaining following the withdrawal of the VanEck/SolidX/Cobe application last month.
The SEC has rejected Bitwise’s bitcoin ETF proposal.
While the outcome is no surprise, the SEC went beyond the call of duty, issuing an excruciatingly detailed 112-page order that reads like a damning indictment of bitcoin’s market structure.
See here: (https://t.co/de7ksDm9Kz)
— Jake Chervinsky (@jchervinsky) October 10, 2019
SEC Bangs the Manipulation Drum Once More
Bitwise applied for the ETF in January, one of a slew of ETF applications at the time, although it always played second fiddle to the VanEck/SolidX application which was considered by many to have the best chance of success. A decision on the Bitwise ETF was delayed back in August, with October set as decision time for the SEC. The resultant rejection has not surprised many in the community, with the SEC detailing their reasons in a lengthy 112-page document containing the following summary:
…the Commission must disapprove a proposed rule change filed by a national securities exchange if it does not find that the proposed rule change is consistent with the applicable requirements of the Exchange Act—including the requirement under Section 6(b)(5) that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices. Thus, even if a proposed rule change would provide certain benefits to investors and the markets, the proposed rule change may still fail to meet other requirements under the Exchange Act.
Wilshere Phoenix Still Flying the Bitcoin ETF Flag
The SEC’s reasoning is broadly along the same lines as other rejections they have issued, with the same criteria at play. Given that very little has changed in the structure of Bitcoin as an asset since the very first ETF application back in 2017 this is hardly a surprising turn of events, and it is highly likely that had the VanEck/SolidX/Cboe application not been pulled it would have experienced the same fate. The rejection leaves only one application still active, that of Wilshere Phoenix, which was filed in May and in September was, of course, delayed, with a decision due in early 2020. Given Bakkt’s underwhelming start to life, whether anyone still cares about a Bitcoin ETF by that point is by no means a given.