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One of the most influencing elements on the crypto market at the moment is the prospect of approved Bitcoin (BTC) exchange-traded funds (ETFs) – an approval which hasn’t been granted yet by the U.S. Securities and Exchange Commission (SEC). However, while it’s still unclear if and when the SEC will finally approve such fund for trading, there are some indicators which signify that this decision may change in the future.
This past week the SEC issued three different orders, again rejecting applications to list Bitcoin ETFs for trading (1, 2, 3), this time a total of nine different applications. In all three orders, the SEC included the following statement:
[T]he Exchange 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 the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices. Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are “markets of significant size.” That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary to satisfy the statutory requirement that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.
The SEC evidently posits that Bitcoin is too susceptible to market manipulations and could be too easily exploited by swindlers – but is Bitcoin really worse than utterly shady ETFs that incorporate garbage subprime mortgages or deceitful multi-level marketing companies? (Hopefully, dear readers, you do understand that this is a rhetorical question.)
Yet, as reported before, there are eminent pro-Bitcoin figures within the SEC who push toward approval; one conspicuous example is SEC Commissioner Hester M. Peirce who had dissented to a similar rejection of another Bitcoin ETF. Peirce’s dissension has been widely cited, quoted and celebrated in the crypto community, and may signal that at some point in the future the SEC would reverse its current viewpoint and approve financial assets with ties to cryptocurrency.
Apparently, bitcoin is not ripe enough, respectable enough, or regulated enough to be worthy of our markets. I dissent: https://t.co/gH5zXaKtmj
— Hester Peirce (@HesterPeirce) July 26, 2018
Another little sign for a possible standpoint shift is an SEC notice that was sent in three letters (1, 2, 3), informing that it will again review the aforementioned nine applications. Although it’s unclear what are the actual chances to reverse the decision and there’s no deadline in the letters, the fact that the SEC had agreed to reassess its prior decision is in itself encouraging.
This letter is to notify you that, pursuant to Rule 431 of the Commission’s Rules of Practice, 17 CFR 201.431, the Commission will review the delegated action. In accordance with Rule 431 (e), the August 22 order is stayed until the Commission orders otherwise.
In fact, as a consequence of this review, some respectable analysts such as CNBC’s Brian Kelly surmise that an approved Bitcoin ETF is unavoidably coming, as early as the beginning of 2019.
— CNBC's Fast Money (@CNBCFastMoney) August 23, 2018
After the SEC letters had become public, the price of Bitcoin made some solid gains, rising from around $6,300 to $6,700; it is definitely not a momentous upsurge in Bitcoin’s volatile terms, but can still point out to at least some hope and faith that the SEC will ultimately approve Bitcoin ETFs, which will then admit cryptocurrency into the mainstream conventional financial world.