The defeat of the COIN Bitcoin ETF turned out to be the story that wasn’t. Yes, it caused a sharp dip in the market, but this was filled within hours on Friday evening. Some say this is not a big deal because other ETF proposals wait in the wings. But the evidence says they will suffer a similar fate.
‘Significant Markets for Bitcoin are Unregulated’
Let’s take you back to Friday afternoon. The decision on the Bitcoin ETF was set to come down by Saturday, March 11th, so the SEC held up their end of the bargain. They did not delay the decision again, but said they will not approve the proposal. The deeper issue is why it was not approved.
“Based on the record before it, the (SEC) Commission believes that the significant markets for bitcoin are unregulated,” the SEC said in a statement. “The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop.”
Bitcoin ETF a ‘Cause for a Pause’
This does not sound like a problem based on The Winklevoss Twins actual proposal, or a technicality. The problem the SEC seems to have is with the Bitcoin market overall. They specifically mentioned multiple global markets, plus a long time view of their progression towards regulation, which really isn’t in the offing.
“The SEC made a strong statement and it listed its concerns, and I thought it did a very good job of explaining its rationale,” Phil Bak, the former head of ETF listings at the New York Stock Exchange told MarketWatch.
Bitcoin will mature as an investment over the coming years, but I don’t think we’ll see a change in how the SEC views it over that time. For the other firms trying to bring one to market, I’m trying to think of a nice way to say, ‘no chance in hell’ for their approval.
The Winklevoss Twins have been on this mission for almost four years and they have decided not to give up on the process. However, the reasons for denial have virtually nothing to do with the proposal, so where do they go from here?
“They can obviously try again, and SEC membership continually changes, but getting rejected is usually a stop, or at least cause for a pause. I don’t know what the next steps would be,” said Todd Rosenbluth, director of ETF and mutual fund research at CFRA.
“The SEC highlighted the unregulated market for bitcoin, and I don’t think the filers could do anything to change that,” Rosenbluth said.
Therefore, it appears that similar filings such as Barry Silbert’s Bitcoin Investment Trust will share a similar fate as COIN or at least until regulators get better oversight of Bitcoin and its related markets.
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