Reasons SEC Turned Down Bitwise Application for Bitcoin ETF

By Richard M Adrian | Crypto Info | 10 Oct 2019


Summary:

  • Modelling Bitcoin in a Bitcoin ETF during this century cripples the new technology with old overhead

  • A Bitcoin ETF diverts investor attention to price speculation, rather than investing  in productive and utility based applications of the technology

  • More volatility and trading makes it harder for  mainstream adoption and utilization of Bitcoin

  • Currency ETFs, even cryptocurrency ETFs, should go with a developed money market

  • Unlike many IPOs, the only "use of proceeds" of launching a Bitcoin ETF is to help current bitcoin holders cash out to traditional funds and brokerage accounts

  • Cryptocurrencies and blockchain platforms should be selected by users for their utility and efficiency, not by regulators or speculators

Just like with past applications for a Bitcoin Exchange Traded Fund, SEC has rejected the most recent submission from Bitwise. The United States securities Exchange Commission (SEC)made a final decision stating that the team did not meet certain requirements.

The official publication dashed any hopes for a future ETF given that the application seemingly had been the best presentation; by a partnership between NYSE Arca (New York Stock Exchange) and Bitwise Asset Management. However, the news isn’t surprising given its not the first application since the famous application; by the popular facebook twins and harvard graduates - The Winklevoss.  

Bitcoin ETF Letter of Disapproval is 112 Pages Long

Assistant Secretary Jil M. Peterson wrote a 112 pages long letter of disapproval outlining SEC’s specific concern. Most of which relate to an eventual market manipulation and other  unscrupulous activities that the team doesn't satisfy.

Note that Bitwise had previously stated that there exists a plethora of genuine exchanges with real trading volumes; that are not manipulated by the market. However, the SEC has been quick to dismiss the team with a lack of satisfaction claim. In which the authority states that even if market manipulation for several of the exchanges might not hold; the Bitwise team did not delineate how different the genuine exchanges were from the illicit platforms. 

The disapproval letter further outlines that Bitwise/NYSE Arca team did not satisfactorily describe how they would conduct market monitoring. SEC holds that proper market manipulation will prevent illegal activities in the market. Most of which are conducted by leading exchanges and which could comprise upto 95% of the market’s volume in comparison to the genuine exchanges.

“The Commission also notes that NYSE Arca has not stated that it has entered or will enter into surveillance-sharing agreements with those “real” spot platforms that utilize surveillance tools. Moreover, even it NYSE Arca did enter into such agreements, it is not clear what ability NYSE Arca would have to compel the sharing of surveillance data.”

Conclusion

The filing of the rejected application dates as far back as January  28, 2019. This rejection serves a big blow to Matt Hougan’sthe Bitwise managing director and global head of research. Matt outlined a few days ago that they were closer than ever to a bitcoin ETF approval.

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Richard M Adrian
Richard M Adrian

I analyze bulls and bears in crypto markets


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