SEC Rejects Winklevoss Bitcoin ETF

Andrew Cummings
March 11, 2017

"The commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop".

The decision by the Securities and Exchange Commission torpedoes the Winklevoss Bitcoin Trust, which currency investors had been closely watching.

In the anticipation of the closely monitored SEC decision on the bitcoin ETF, bitcoin prices traded as high as $1,325.81 Friday, compared to about a $296 price a year ago.

"Based on the record before it, the commission believes that the significant markets for bitcoin are unregulated", it continued.

Now the ways of buying and investing in bitcoin are fairly limited: on online exchanges or through a trust that charges premium prices.

The regulators have questions and concerns about how the funds would work and whether they could be priced and trade effectively, according to a financial industry source familiar with the SEC's thinking.

The 35-year-old identical-twin entrepreneurs have been evangelists for bitcoin in recent years, insisting it could even replace gold as a stable currency. At that point, the agency would reconsider its position.

Around 4 p.m., the Securities and Exchange Commission dealt the digital currency a major blow, denying the application for the much anticipated Winklevoss Bitcoin Trust ETF. Yet, this is unlikely to happen unless bitcoin becomes easier to buy and its price history becomes more stable.

"How do we develop well-capitalized and regulated markets in the USA and Europe if financial innovators aren't allowed to bring products to market that grow domestic demand for digital currencies like bitcoin?" asked Jerry Brito, executive director of Coin Center, an advocacy group.

"The SEC is the gatekeeper against securities that are not properly market tested and could be a danger to investors", said Mark T. Williams, master lecturer at Boston University, who focuses on risk management. While prices had broken $1,300 this week in anticipation of approval, they fell steeply on Friday.

The decision is not the end, however, since other companies also have proposals for ETFs before the SEC, including one proposal that calls for the digital assets underlying the ETF to be insured.

Introduced to the public in 2009, bitcoin is a cryptocurrency created to cut out banks, credit card companies and other financial third parties as a means for buying goods and services.

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