Not that anyone should be too surprised at the news, but the U.S. Securities and Exchange Commission (SEC) has denied yet another attempt to introduce a cryptocurrency exchange-traded fund (ETF). As the deadline approached for the commission to offer a definitive response to Bitwise Asset Management’s proposed ETF, the answer has been published and it is simply no. The reason given is the same boilerplate response seen in all of the previous rejections.
According to an announcement (in pdf) by the SEC, the ETF, which Bitwise had hoped to issue in collaboration with the NYSE Arca exchange, didn’t meet the commission’s guidelines for preventing market manipulation and illicit activity. It added, “Rather, the Commission is disapproving this proposed rule change because … NYSE Arca 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 Exchange Act Section 6(b)(5), and, in particular, the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices.'”
The decision wasn’t unexpected by most, but Bitwise had remained optimistic. The company’s managing director and global head of research, Matt Hougan, recently said while participating in an interview with CNBC, “We’re closer than we’ve ever been before to getting a Bitcoin ETF approved,” adding, “Two years ago, there were no regulated, insured custodians in the Bitcoin market. Today, … there are big names like Fidelity and CoinBase [with] hundreds of millions of dollars of insurance from firms like Lloyd’s of London.”
The SEC’s continued assertion that it cannot approve crypto ETFs because of the possibility of manipulation is unfounded, given the continued legal actions against entities and individuals who have been accused of manipulation traditional markets and products. No “national securities exchange” in existence can “prevent fraudulent and manipulative acts and practices.” It can only work to ensure the integrity of the platform and try to prevent fraudulent activity.
Where things go from here and whether or not another attempt will be made to introduce a crypto ETF remain to be seen. SEC Chairman Jay Clayton still has about two more years left in his position, so any decision to try to introduce a new crypto ETF might not take place until after 2021.
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