The United States Securities and Exchange Commission (SEC) has rejected an application by asset manager VanEck Investments to offer a spot Bitcoin Exchange-traded Fund (ETF) in the country. The SEC has been reviewing the application since March, but has now given a verdict after exhausting the regulatory period for approving or disapproving the proposal.
In an order published today, the SEC disapproved of the proposed rule change by VanEck to list the Bitcoin ETF product.
The SEC noted that the disapproval is because the Chicago Board Options Exchange (CBOE), the proposed trading venue for the product, does not have processes in place to “prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.
The SEC alleged that CBOE does not have a comprehensive “surveillance-sharing agreement with a regulated market of significant size related to the underlying” bitcoin market. The SEC alleged that having such an agreement in place would deter market manipulation and make involved parties more accountable.
In simpler terms, the SEC is requiring that CBOE enter into some sort of agreement with spot exchanges that facilitate a significant amount of global bitcoin trading volume. The argument is that entities trying to manipulate the price of bitcoin would go to these spot venues, and that the CBOE needs to show that it has sufficient purview of these markets so that manipulators can easily be apprehended.
The Wait for a Spot Bitcoin ETF Continues
While there are still a number of Bitcoin ETF applications awaiting the SEC’s verdict, the VanEck ruling means there’s now a significantly lower chance of any of them getting a greenlight from the regulator. Earlier this month, the SEC cleared the launch of bitcoin futures ETFs, investment offerings that track the price of the bitcoin futures market (not the spot).
Industry participants argue that a spot Bitcoin ETF is more valuable for the industry since it directly requires the funds to hold actual bitcoins, and also has significantly lower fees than futures-based ETFs. However, the SEC remains uninterested and the wait for spot Bitcoin ETF continues.
