After last month’s introduction of the first funds linked to Bitcoin futures, the Securities and Exchange Commission rejected a proposal for an ETF that would directly hold the cryptocurrency, putting an end to hopes that a long-awaited product would finally be approved.
The SEC has refused VanEck’s application to trade its Bitcoin exchange-traded fund on Cboe Global Markets Inc., marking the first decision on the matter since the first Bitcoin futures ETFs were introduced.
The regulator restated its long-held concern that basing a product on the spot price of Bitcoin could violate securities rules due to the market’s proneness to abuse in a Friday order.
“The Commission has consistently required that the listing exchange have a comprehensive surveillance-sharing agreement with a regulated market of significant size related to Bitcoin, or demonstrate that other means to prevent fraudulent and manipulative acts and practices are sufficient,” the SEC said. “The listing exchange has not met that requirement.”
Following the denial, Bitcoin’s price fell as low as $62,311, a loss of 4.2 percent. On Monday, the largest cryptocurrency reached an all-time high of $68,991.
Because Bitcoin futures trade on highly regulated exchanges, SEC Chair Gary Gensler has stated that he is comfortable with futures-based ETFs. With real Bitcoin, however, this is not the case.
Despite the fact that many analysts believe an Ether-futures ETF will be the next product to hit the market, the physically-backed Bitcoin ETF remains the Holy Grail. The Winklevoss twins, who made their fortune from Facebook Inc., filed the initial application in 2013.
The launch of two Bitcoin futures ETFs in October was a watershed moment for the industry. The ProShares Bitcoin Strategy ETF amassed more than $1 billion in assets in only days, while the Valkyrie’s Bitcoin Strategy ETF received a more muted but nevertheless enthusiastic response.
Their debuts sparked a lot of buzz about Wall Street’s embrace of crypto and fuelled hopes that the SEC would be more receptive to a physically-backed Bitcoin fund this time around.
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