US SEC Regulators Reject Bitcoin ETF, Price Plunges, Recovers

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The U.S. Securities and Exchange Commission on Friday denied a request to list what would have been the first U.S. exchange-traded fund built to track bitcoin and Bitcoin briefly plunged below $1000, but was last seen near $1,150. Investors Cameron and Tyler Winklevoss have been trying for more than three years to convince the SEC to let it bring the Bitcoin ETF to market.

“Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated,” the SEC said in a statement posted online. “The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop.”

The ETF is more or less a common stock fund pegged to the price of Bitcoin, allowing investors to purchase Bitcoin without the work of establishing a personal wallet. (In concrete terms, the ETFs investors will be buying shares whose price will always be the same as the the price of a single bitcoin, similar to an equivalent investment in gold or cattle.) Without a wallet, investors still won’t be able to spend Bitcoin, but they can buy and sell it at market price, adding more liquidity to the Bitcoin system overall.

From the rejection of the filing:

Several commenters note that the majority of bitcoin trading occurs on exchanges outside the United States. One commenter claims that most daily trading volume is conducted on poorly  capitalized, unregulated exchanges located outside the United States and that these non-U.S. exchanges and their practices significantly influence the price discovery process. Another  commenter states that the biggest and most-influential bitcoin exchange is located outside U.S.  jurisdiction.

One commenter states that, since 2013, the price of bitcoin has been defined mostly by
the major Chinese exchanges, whose volumes dwarf those of exchanges outside China. According to the commenter, those exchanges are not regulated or audited, and are suspected of  engaging in unethical practices like front-running, wash trades, and trading with insufficient funds. The commenter interprets pricing data from these Chinese exchanges to mean that the  price of bitcoin is defined entirely by speculation, without any ties to fundamentals.

Another  commenter also observes that Chinese markets drive much of the volume in the bitcoin markets  and that the bitcoin/Chinese Yuan (BTC/CNY) quote is apt to trade at a significant premium to  the bitcoin/U.S. dollar (BTC/USD) quote. The commenter points out that large arbitrage  opportunities would not exist for long in efficient markets, but they do persist in bitcoin  markets. One commenter claims that a sizeable number of traders and owners of bitcoin do not  desire to trade in a well-regulated environment for reasons including tax evasion, evading capital  controls, and money laundering. This commenter also states that U.S. exchanges do not offer  products such as fee-free trading, margin trading, or options, which drive traffic to the top non U.S. exchanges. The commenter claims that, because trade is now sparse on regulated U.S.  exchanges including Gemini, arbitrage will not occur efficiently or proportionally to mitigate

About Richard Kastelein

Founder of industry publication Blockchain News, partner at ICO services collective CryptoAsset Design Group (helped raise over $200m+), director of education company Blockchain Partners (Oracle Partner) and ICO event organiser at leading industry event  CryptoFinancing (first ICO event in Europe) - Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He sits on the advisory boards of half a dozen Blockchain startups and has written over 1200 articles on Blockchain technology and startups at Blockchain News and has also published pioneering articles on ICOs in Harvard Business Review and Venturebeat.
 
Kastelein has spoken (keynotes & panels) on Blockchain technology in Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen, the Hague, Helsinki, London, Manchester, Minsk, Nairobi, Nanchang, San Mateo, Shanghai,Tel Aviv and Venice. His network is global and extensive.
 
He is a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean & Europe. He's written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian and Virgin.com and his work and ideas have been translated into Dutch, Greek, Polish, German and French.
 
A journalist by trade, an entrepreneur and adventurer at heart, Kastelein's professional career has ranged from political publishing to TV technology, boatbuilding to judging startups, skippering yachts to marketing and more as he's travelled for nearly 30 years as a Canadian expatriate living around the world.
 
In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, "The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, Netherlands where he's raising three teenage daughters with his wife and sailing partner, Wieke Beenen.

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