American regulation body comes out against Bitcoin ETFs

Christian MacLeod

A major American regulator has announced its decision to block the creation of a number of proposed new Bitcoin funds.

The Securities and Exchange Commission (SEC) said that it was concerned that fraud was a risk if the Bitcoin exchange traded funds (ETFs) went ahead.

ETFs are securities with values derived from another asset, and which enjoy dynamic prices – largely similar to an item on a stock exchange. They offer traders a range of additional options compared to standard cryptocurrency trading, including the chance to invest in “physical” cryptocurrencies.

The ETFs ruled out by the SEC in this particular round of rejections were diverse. Five proposals by Direxion were leveraged products, which would have given investors the chance to enhance any potential profits through the use of debt.

A rejected pair of proposed funds from ProShares would have been derived from futures contracts in a Bitcoin context had they been approved.

According to the SEC, it made the decision in part because of concerns over “fraud and manipulation of bitcoin markets”.

“A national securities exchange’s rules must be designed to prevent fraudulent and manipulative acts and practices,” it said.

However, it also returned to a common regulation problem that the crypto world has had to grapple with in recent years: whether or not it has the characteristics and nature to be effectively regulated by a traditional regulator.

A few cryptocurrencies have been accepted as being securities by the wider industry, but debate rages over whether or not most meet that definition, especially when size is taken into consideration.

“Among other things, the Exchange has offered no record evidence to demonstrate that Bitcoin futures markets are ‘markets of significant size’,” the SEC added.

The recent decision comes after a range of ETF license application rejections were given to Cameron and Tyler Winklevoss, two internet investors who previously sued Mark Zuckerberg over claims he stole their ideas when creating Facebook.

The Winklevoss twins, who now invest in major crypto payment service BitInstant, found out earlier this month that their application for a Bitcoin ETF had been declined.

According to Tyler Winklevoss, the reason that this hybrid of Bitcoin and a traditional physical investment vehicle didn’t work out was because of a mood of suspicion towards cryptocurrencies among institutional investors.

“Wall Street is taking cryptocurrencies seriously, however, the vast majority of Wall Street firms are still not participating in the cryptocurrency market, which remains primarily a retail-driven market,” he said in an interview.

However, he was positive about what he predicts will be the eventual outcome: “This will change over time, but it will take time,” he emphasised.

More broadly, the SEC has waded into the cryptocurrency debate on several occasions in the past and is likely to do so again.

Industry experts suggest that approval of ETF applications by this and other regulators won’t occur until the cryptocurrency world can show that prices are safe against market manipulating, perhaps by instituting “surveillance-sharing” type arrangements which monitor the market on a regular basis.


Christian MacLeod

Latest news

EUR/USD hits $1.18 following German sentiment survey
Despite seeing some positive gains on Monday following the posting of positive news regarding the details of a stimulus package and US labour market data, the USD has suffered a minor blow against the EUR as the economic situation stabilises in Europe. Read more
USD rising against EUR as aid package looms
Having fallen almost 10% since late March, the USD has been taking quite the thrashing as of late. Read more

Safest Forest Brokers 2020

Broker Info Best In Customer Satisfaction Score
#1 ForexTime LogoYour capital is at risk Founded: 2012 Global CFD and FX broker
Number One Broker
Best FOREX BROKER Visit broker
5
#2 Forex Broker Pepperstone LogoYour capital is at risk Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
5
#3 Plus500 Logo80.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008 Global CFD Broker
Number One Broker
Best Trading App Visit broker
5
#4 Your capital is at risk Founded: 2006 Globally regulated broker
Number One Broker
BEST CUSTOMER SUPPORT Visit broker
5
#5 BlackBull MarketsYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
5

    Forex Fraud Certified Brokers

    Exness Small Logo
    Forex.com Logo
    BlackBull Markets Small Logo
    City Index Logo
    IQ Option Logo
    iTrader Logo
    XTB Logo
    Plus500 Small Logo
    Swissquote logo
    HYCM Logo
    ATFX Logo
    LegacyFX Small Logo
    Oanda Small Logo
    Pepperstone
    VantageFX Small Logo
    XM Logo
    FXTM Logo
    Oinvest Small Logo
    OctaFX Logo