The creation of a Bitcoin exchange traded fund (ETF) is widely seen as the next frontier in the establishment of Bitcoin in the financial mainstream. Any such product would make it much easier for financial institutions and retail investors to gain exposure to cryptocurrency without having to deal with wallets, private keys and all the other particular characteristics of Bitcoin trading and storage. So far though, the U.S. Securities and Exchange Commission (SEC) has been unwilling to give authorisation for any such product.
This week the SEC rejected for the second time the Winklevoss twins’ plans to be the first to bring a Bitcoin ETF to market. Though the rejection took the market by surprise, it has since recovered on optimism that an ETF will get approved, sooner or later.
SEC making a “really important statement”
The length and detail of the SEC’s rejection statement is particularly notable. As Barry Pershkow, a former SEC lawyer, told Bloomberg, “you don’t write 92 pages and undertake serious economic analysis unless you’re trying to make a really important statement.”
In Pershkow’s view, any similar applications will likely be refused on the same grounds and it will likely take up to three years for anyone to satisfactorily meet the SEC’s concerns.
However, this time there is some cause for optimism. For the first time one of the SEC Commissioners has publicly disagreed with the majority decision to reject the ETF. In the view of Commissioner Hester Peirce, the role of a regulator is “not to judge the value of what an investment is, it’s to give people the opportunity to make those judgments themselves.”
An ETF would “allow institutions to play a bigger role in the Bitcoin market,” which should increase liquidity and stable hands in a notoriously volatile marketplace. This, Peirce says, “would be good for the market and be good for retail investors as well.“
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