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Not much surprises there, but the official branches of the U.S. government are still not prepared to fully introduce Bitcoin (or Bitcoin-related) endeavors into the mainstream financial market.
On July 26th, the Securities and Exchange Commission (SEC) rejected an application of the Winklevoss brothers (yes, the Facebook guys) of a Bitcoin exchange-traded fund (ETF), elaborating that Bitcoin is not resistant enough to manipulation and fraud. From the SEC order (full 92-page report PDF):
[T]he central factor for the Commission in its current consideration of the BZX proposal is whether it is consistent with … the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest … the Commission concludes that, as discussed above, BZX has not established that these proffered means of compliance—alone or in combination—are sufficient to meet the requirements.
This is the second time that the SEC denies the Winklevoss’ petition – the previous one had been rejected in March 2017 because the SEC had maintained “that the significant markets for bitcoin are unregulated.” An ETF is essentially a tradable financial commodity that is attached to a price of a certain asset, Bitcoin in this case. If approved, it would have opened up Bitcoin to whole new segments of investors and would have raised the cryptocurrency profile in the conventional financial world; but, unfortunately, the SEC rejected for the second time now such fund.
Yet, this time there was also a silver lining. The current SEC decision was made after a 3-1 vote in which Commissioner Hester M. Peirce was the one voice who dissented. Shortly after the SEC released its report, Peirce’s detailed dissension was published as well; and her conclusion that closes her reasoning is simply a must-read for anybody who follows and is interested in the crypto market. Here’s her conclusion in full:
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.
So even though the Bitcoin ETF request was denied, at least some progress was made with Peirce’s resounding remarks, which just might assist in shifting other opinions toward the other side in the future.
As a result of the SEC decision, the price of Bitcoin did see a temporary drop. BTC had tumbled from around $8,200 to about $7,800, but quickly recovered a day later back to the same price range as before the SEC decision.
While there was certainly a lot of disappointment in crypto communities due to the SEC decision, some reputable figures and crypto experts such as Ethereum co-founder Buterin Vitalik believe that there should be less focus on Bitcoin as an investment and more focus about its usage.
I think there's too much emphasis on BTC/ETH/whatever ETFs, and not enough emphasis on making it easier for people to buy $5 to $100 in cryptocurrency via cards at corner stores. The former is better for pumping price, but the latter is much better for actual adoption.
— Vitalik Non-giver of Ether (@VitalikButerin) July 29, 2018
Well, at least at this point in time, it seems that mass adoption of Bitcoin would have to occur with very little help from official U.S. authorities.