The SEC's long-delayed ruling comes as no surprise, as Chairman Gary Gensler has been fairly clear that he opposes spot Bitcoin ETFs, which would issue shares tracking the value of Bitcoin.
Citing the potential for fraud and market manipulation, the U.S. Securities and Exchange Commission has rejected asset manager VanEck's application to launch a Bitcoin exchange-traded fund.
In an order issued on November 12, the Commission concluded that the application by the Cboe BZX Exchange to list and trade shares in the VanEck Bitcoin Trust had not met the burden of proving that it is "designed to prevent fraudulent and manipulative acts and practices" and "to protect investors and the public interest."
The SEC's long-delayed ruling comes as no surprise, as Commission Chairman Gary Gensler has been fairly clear that he opposes spot Bitcoin ETFs, which would issue shares tracking the value of Bitcoin.
ETFs hold a basket of underlying assets, such as commodities, bonds, or a collection of securities — like the stocks that make up the S&P 500. A spot Bitcoin ETF would hold the cryptocurrency itself, while a futures-based Bitcoin ETF holds a basket of BTC futures contracts rather than tokens.
Under Gensler, who taught cryptocurrency and blockchain at MIT before taking over the SEC, the agency has already approved two futures-based Bitcoin ETFs, ProShares Bitcoin Strategy ETF ($BITO) and the Valkyrie Bitcoin Strategy ETF ($BTF). They have proven remarkably popular, with more than $400 million traded on November 10 alone, according to Bloomberg senior ETF analyst Eric Balchunas. He added:
"For context, $BITO's volume puts it in the Top 2% of all ETFs. About what $MDY [the SPDR S&P Midcap 400 ETF Trust] traded."
The Rules Apply
The application was technically a request for a rules change by the Cboe BZX Exchange that would allow it to list and trade shares of VanEck Bitcoin Trust.
Specifically, it sought to bypass the need for a "comprehensive surveillance-sharing agreement with a regulated market of significant size related to the underlying or reference bitcoin assets," the SEC said. To do this, BZX would have to demonstrate "that the bitcoin market as a whole or the relevant underlying bitcoin market is uniquely and inherently resistant to fraud and manipulation."
Stating that it not agree that was the case, the SEC pointed to seven "possible sources of fraud and manipulation in the bitcoin spot market generally" that it had cited in turning down previous Bitcoin ETF applications:
- "Wash" trading
- Persons with a dominant position in Bitcoin manipulating Bitcoin pricing
- Hacking of the Bitcoin network and trading platforms
- Malicious control of the Bitcoin network
- Trading based on material, non-public information, including the dissemination of false and misleading information
- Manipulative activity involving the purported "stablecoin" Tether (USDT)
- Fraud and manipulation at Bitcoin trading platforms
