The Securities and Exchange Commission (SEC) has rejected an application for a Bitcoin ETF that was filed by Bitwise Asset Management via NYSE Arca.
The regulator decided that it did not meet legal requirements to prevent market manipulation and other illicit activities, with NYSE Arca taking the brunt of the blame.
The disapproval order stated: “The Commission is disapproving this proposed rule change because, as discussed below, 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.’”
At this point, it's reasonable to assume that Jay Clayton's SEC will never approve a bitcoin ETF.
His term ends on June 5, 2021, but could go another 18 months longer.
Usually we'd see new ETF proposals filed immediately after rejection, but it might be time to take a year off.
— Jake Chervinsky (@jchervinsky) October 10, 2019
The news comes less than a month after the VanEck/SolidX application was withdrawn, suggesting that Bitcoin is simply too immature as an asset for an ETF.
Due to the unregulated nature of cryptocurrency markets, mitigating against price manipulation has proved to be difficult with multiple cases of pump and dumps, wash trading and spoofing being seen over the past few years.
One of the issues with Bitcoin is the lack of liquidity on exchanges, this means that it takes a much smaller buy or sell order to move the market in either direction, thus making it prone to illicit trading activities.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.