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SEC Rejects Application for Bitcoin Spot ETF

On Friday, the U.S. Securities and Exchange Commission, rejected the proposal by VanEck for a Bitcoin exchange-traded fund (ETF) that would have held actual cryptocurrencies rather than just Bitcoin futures. Submitted in March, by the Cboe BZX Exchange, the VanEck plan sought to buy Bitcoin directly on the “spot” market and hold it in an ETF that investors could then have a stake in. A futures-based ETF invests in an indirect contract to buy or sell an asset at a set date in the future.

While the SEC has allowed two Bitcoin futures-based ETFs to begin trading last month, it would not authorize an ETF containing actual Bitcoin, citing its frequent worries of possible manipulation and fraud within the crypto market. An excerpted rationale for the rejection from the 51-page SEC report reads: 

The Commission concludes that BZX [VanEck] has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), in particular, the requirement that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.” 

Friday’s rejection occurred only weeks after the SEC allowed two futures-based bitcoin ETFs to begin trading. The first was the ProShares Bitcoin Strategy ETF, which started trading on Oct. 19, and it was followed by the Valkyrie Bitcoin Strategy ETF, which listed three days later.

There are several other similar bitcoin ETF applications awaiting decisions.

According to CoinMarketCap.com, Bitcoin dipped to around $62,000 when the SEC announcement came down, but it has rebounded to more than $64,000 as of this writing. 

On The Flipside

  • Whether it’s spot- or futures-based, a Bitcoin ETF is a lousy way to get into crypto. 
  • Buying into an ETF adds unnecessary delays, fees, and intermediaries into a process you can easily do on a centralized exchange such as Coinbase if you don’t know where to start.
  • Bitcoin was created to REMOVE delays, fees, and middlemen – not inject them into the crypto purchasing process.

Why You Should Care?

This will likely delay mainstream adoption of cryptocurrencies somewhat, however, there are still many venues available to anyone who wants to invest in the space.

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    This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

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    Author

    Tor Constantino is a former journalist, consultant and current corporate comms executive with an MBA degree and 25+ years of experience - writing about cryptocurrencies and blockchain since 2017. His writing has appeared across the web on Entrepreneur, Forbes, Fortune, CEOWorld and Yahoo!. Tor's views are his own and do not reflect those of his current employer.