SEC rejects the Bitwise BTC ETF proposal before the mandated deadline


SEC, in surprise move, rejects the Bitwise BTC ETF proposal before the mandated deadline. According to Cointelegraph and Coinbase, the SEC hurriedly put out a press release after hours on Wednesday to announce its negative decision. The regulator cited that the Bitwise proposal was not “designed to prevent fraudulent and manipulative acts and practices”. The announcement comes as BTC is rallying, due to the Fed’s decision to expand reserves.

Monday is the day. Circle it on your calendar. Time has run out for the SEC. They must make a decision on the Bitwise Asset Management BTC Exchange-Traded Fund (ETF) application. Analysts, investors, and industry observers have grown tired of seeing at least a dozen similar applications go down in flames for various reasons cited by the SEC staff in the past. Everyone would like to think that this time is different, but a 275-day wait has been excruciating. Jay Clayton, the head honcho at the SEC, has said “progress was being made”, but there was “work left to be done”, i.e., another coin toss?

Will markets react on Monday or before, if word leaks out? Speculation is already building. Articles are popping up everywhere, gradually creating awareness and the suspense that goes along with either a favorable or dreaded outcome from the folks at the SEC. If the excitement level gets too high, then you might well expect there to be a “sell-on-the-news” response to the pivotal announcement.

As Monday approaches, guesstimates are flying right and left, mostly mixed, if you are an optimist, but decidedly negative, if we are truthful about the prevailing bias of the “herd”. Too many people have been burned by a regulatory body that, at the end of the day, does not want to become too congenial with the crypto revolution. With the exception of Hester Peirce, who is only one of five commissioners and also affectionately known as “Crypto Mom”, no one has professed her belief that the market should decide the fate of this product and if it truly has merit in the marketplace. This decision should not be left to a regulatory body. It stifles innovation.

For a while this year, there were actually three BTC ETF applications in the SEC pipeline for review. The VanEck consortium recently withdrew their proposal in order to go the way of the “accredited investor” crowd with limited access to institutional investors only. The Wilshire Phoenix ETF proposal came late to the party in May and was promptly handed a delay, as has been the SEC’s practice in these deliberations. To its credit, the SEC has been working in the background to build its own crypto oversight infrastructure that would be required at some point to monitor the market.

As the deadline for the SEC’s verdict gets closer, here are a few of the current guesses at what might transpire:

  • Per Blockonomi – Michael Moro, CEO of Genesis Trading/Genesis Capital: “I am not confident that we’ll see an ETF in the United States anytime soon.”
  • Per UsetheBitcoin – Matt Hougan, managing director and global head of research for Bitwise: “It is not just the work Bitwise did, but just the evolution of the Bitcoin market in the last two years is from night to day and that’s why I think we are closer than we’ve ever been before to getting a Bitcoin ETF approved.”
  • Per Cryptobriefing – Christoph de Courson, co-founder and CEO of Olymp Capital: “Neither the bitcoin spot market or derivative market are really liquid enough for any institutional investment firm to consider them. Bitcoin also has extremely high volatility, which would make it very difficult to handle as part of an investment portfolio.”

These three comments are but a sampling of opinions from folks in the business. The general consensus is that it is still too early in the process. Yes, the Bitcoin market has evolved and is much more efficient that it has ever been. Institutional-grade custodial facilities now populate the market of crypto exchanges in the U.S., and each of these exchanges has installed to some extent the monitoring software provided by the Nasdaq to police the space for potential price manipulation tactics.

Detractors still speak to the unregulated nature of the crypto exchange network, although all U.S. exchanges must comply with FINCEN requirements, since they fall within the definition of a money transfer agent. Martin Sabljak, Manager at blockchain incubator, Adel Ecosystem, echoes the overriding fraud concern that persists:

There’s too much negative news about scams out there. Every month we get some scam report about this and the main concern is if it’s safe enough for “grandma” to invest in.

And so the wait is on. There will surely be some kind of market reaction due to the pent-up anticipation that this event has engendered. It may occur before, during and after the announcement on Monday.

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