SEC Disapproves Winklevoss Bitcoin ETF: What Next?

The Securities and Exchange Commission has forbidden an application by the Winklevoss brothers to come up with a bitcoin ETF, finding the product not safe enough for investors. The SEC said that it cannot "conclude that bitcoin markets are uniquely resistant to manipulation."

Bitcoin dropped about 6% to the level of $7,922 on Jul 27 from the one-week high of $8431.88 recorded on Jul 25 due to the rejection news, as per data from condesk.com. Bitcoin prices have been gathering steam in recent weeks on rumors that the SEC could give a nod to a bitcoin ETF as early as August.

This is the second time the SEC is rejecting a bitcoin ETF proposed by Cameron and Tyler Winklevoss. Last year, the SEC said no to an applicationfor the "Winklevoss Bitcoin Trust," but in June, the group submitted a proposed rule change.

Why Such Stringency?

SEC is worried about its extreme price volatility in cryptocurrencies and liquidity in bitcoin-related funds. Per Reuters, the virtual currency can be deployed to quickly move money anywhere in the world without any central authority intervention, such as a bank or government. A fund holding the currency could draw more investors and materially boost its price.

Several central banks issued warnings against it.South Korea, which makes up about 20% of global bitcoin trading, created a government department last week targeted at formulating policy initiatives around financial technology and cryptocurrencies.

The Chinese government also clamped down on initial coin offerings (ICO). The Reserve Bank of Australia sees it as "speculative mania" and finds bitcoin more popular in the illegal economy, not among consumers.

Several Filings on the Way

In the past several months, many issuers tried to launch a bitcoin ETF. Among the latest expectants,Bitwise Asset Management filed (this July) for an index fund that intends to follow the performance of a basket of the 10 largest cryptocurrencies.

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