SEC or Securities and Exchange Commission has issued rejections to bitcoin-exchange traded funds or ETF proposal from ProShares, Direxion, as well as GrainiteShares.

In three orders, which were published on the 22nd of August, the rejections came ahead of previously reported deadlines which arose from the public-facing approval process of SEC.

Notably, the agency has used the exact same reasoning, as well as the wording in all of its rejections.

Rejections to the proposals of ProShares, Direxion, and GraniteShares

In the case of ProShares, the agency wrote that the Commission is opposing this proposed rule as the Exchange has not met its burden under the Exchange Act the Commission’s Rules of Practice. In order to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b) (5), especially the condition that the rules of a national securities exchange could be designed to prevent fraudulently, as well as manipulative acts and practices.

In the case of the five proposed ETFs of Direxion, the agency said that the Commission is disapproving this proposed rule change as the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice; in order to explain that its proposal is compatible with the requirements of the Exchange Act Section 6(b) (5) –  particularly the condition that the laws of a national securities exchange could be designed to prevent fraudulent and manipulative acts, as well as practices.

In all of the examples, the Securities and Exchange Commission indicated that its disapproval does not lean on an evaluation of whether Bitcoin or blockchain technology more generally, has use or value as an innovation or as an investment.

This similar language has also been used in the GraniteShares rejection.

The move to block Bitcoin ETF is a disservice to investors and innovators

The rejections actually came mere weeks after SEC commissioners have completed a review on a proposed Bitcoin ETF from the investors Cameron and Tyler Winklevoss, who had a multi-year effort which was dashed after a majority of the commissioners of SEC backed up the original March 2017 decision of the agency.

Hester Peirce, one of the commissioners, dissented that decision, later stating that the move to block Bitcoin ETF is actually a disservice to both the investors and the innovators.

For those who have read the disapproval orders for Bitcoin ETFs in the past, the language likely calls to mind the justifications which are used to twice strike down a proposal from the investors Cameron and Tyler Winklevoss for their proposed Bitcoin ETF.

Yet, for the three companies which were named, the proposals were unique in that they were attached to the market for Bitcoin futures preferably than a fund which holds Bitcoin directly.

The SEC did not reach a notable point

However, the SEC cited a letter from one of the current markets for Bitcoin futures in the U.S., CBOE, saying that the President and COO of CFE, recently acknowledged to the Commission staff that the current Bitcoin futures trading volumes on CBOE Futures Exchange and CME may probably not be enough to support ETPs that seek 100% long or short exposure to Bitcoin.

At this same time, the SEC did not reach a notable point: the investors are going to gain an extra layer of protection by trading exchange-based products for Bitcoin, while it will also contend that possible benefits should be held against some other considerations.

Some officials argued in the ProShare rejection, saying that the Commission acknowledged that, compared to trading in unregulated Bitcoin spot markets, trading a Bitcoin-based ETP on a national securities exchange may actually provide some additional protection to investors. But the Commission also has to examine this potential benefit in the wider meaning of whether the proposition meets each of the applicable requirements of the Exchange Act.


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