The US Securities and Exchange Commission rejected the latest Winklevoss twins’ Bitcoin ETF application, but Commissioner Hester M. Peirce strongly disagrees.
The price of Bitcoin has surged over the last week, partly fueled by speculation that a cryptocurrency ETF was finally going to be approved. However, the Securities and Exchange Commission threw a cinder block through the windshield of the hopes and dreams of crypto enthusiasts by rejecting the application submitted by the Winklevoss twins.
The Winklevoss twins had submitted the proposal that the BATS BZX Exchange list their Winklevoss Bitcoin Trust, but that proposal was shot down by the SEC. The main reason for the rejection was the agency believed that Bitcoin markets are not “uniquely resistant to manipulation.”
The SEC pointed out that the vast majority of cryptocurrency trading and exchanges reside overseas, which puts them out of the jurisdictional reach of the US government. The agency says that they are acting to protect investors from fraud and market manipulation, which are reasonable concerns.
Still, the rejection of the Bitcoin ETF proposal was met with sadness. The price of Bitcoin dropped upon the news, but it has since rebounded and remained relatively stable. Currently, Bitcoin is trading for $8,197.01, according to CoinMarketCap, which represents a loss of 0.41 percent in the last 24 hours.
Commissioner Not Happy
SEC Commissioner Hester M. Peirce disagrees completely with the agency’s decision on the Bitcoin ETF rejection. She published a public dissent that outlined her views. Some of the points she raises are fairly technical in regards to legal definitions, but she also says that the rejection stifles innovation and curtails institutionalization, which she believes would actually help investors.
I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order. More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs [exchange-traded products].
Commissioner Peirce believes that the SEC should be more favorable in approving products. She also is of the opinion that investors are actually better judges of the merits (or lack thereof) of new innovative products than government regulators.
Her conclusion is absolutely terrific and succinctly lays out the case of why the Bitcoin ETF rejection is not a good thing. She says:
By precluding approval of cryptocurrency-based ETPs for the foreseeable future, the Commission is engaging in merit regulation. Bitcoin is a new phenomenon, and its long-term viability is uncertain. It may succeed; it may fail. The Commission, however, is not well positioned to assess the likelihood of either outcome, for bitcoin or any other asset. Many investors have expressed an interest in gaining exposure to bitcoin, and a subset of these investors would prefer to gain exposure without owning bitcoin directly. An ETP based on bitcoin would offer investors indirect exposure to bitcoin through a product that trades on a regulated securities market and in a manner that eliminates some of the frictions and worries of buying and holding bitcoin directly. If we were to approve the ETP at issue here, investors could choose whether to buy it or avoid it. The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets. Accordingly, I dissent.
What do you think of the commissioner’s dissent concerning the Bitcoin ETF rejection? Let us know in the comments below.
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