SEC Denies All Pending Bitcoin ETF Applications

The speculation can finally be put to rest. A bitcoin ETF coming to market in 2018. Not happening and the Securities and Exchange Commission (SEC) pretty much sealed the deal on it.

SEC Rejects All Proposed Changes

Most people were expecting a ruling on just the ProShares ETF applications as the deadline for those had arrived. However, the SEC decided to take care off them all in one fell swoop. Also denying the applications from Direxion and GraniteShares.

Below is verbiage from the SEC’s ruling:

“This order disapproves the proposed rule change. Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment. Rather, the Commission is disapproving this proposed rule change because, as discussed below, the 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.”

Surprised, not me

Maybe I’m not much of an optimist, but on the other hand maybe I’m just a realist. The writing was on the wall with these as it was only months ago that the Winklevoss twins attempt at an ETF was denied.

Did we really think that much in the crypto market changed since then to alleviate the SEC’s concerns? I mean, come on let’s be logical here.

The manipulation and fraud concerns they have are technically still valid – atleast in the sense of traditional financial transacting, which is what the SEC does.

I guess since the ProShares were to be based off bitcoin futures as opposed to crypto exchanges that gave people a sliver of hope to ride on. However, I’m pretty sure there is one key item that will be needed before we see bitcoin ETFs…

Custodian

Once there are at least a couple “qualified” custodians then maybe, just maybe the SEC will change its tune.

If you are unaware of what a Custodian Bank is, essentially it’s a specialized financial institution responsible for safeguarding a firm’s or individual’s financial assets and is not engaged in traditional retail or commercial banking.

If you remember Coinbase recently created a division to provide this service. Thus, we are headed in the right direction. I think it is just a matter of time before a “familiar” financial name comes on board with something like this. There is too much money to be made not too.

As for my guess on when we will see Bitcoin ETFs. I’m thinking sometime in Q1 2019 may have a shot.

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