SEC Rejects Wilshire Phoenix’s Bitcoin ETF, Commissioner Hester Peirce Files Dissent

The Securities and Exchanges Commission has once again rejected the New York-based Wilshire Phoenix’s Bitcoin Exchange Traded Fund (ETF) application which started in mid-2019. The 76-page report cites protection of investors from risky investments and market manipulation as the reason for the disapproval.

They insist that the NYSE Arca has failed to satisfy the Exchange’s Act and the Commission’s Rules of Practice that indicates compliance with the requirements of Exchange Act Section 6(b)(5). The filing said,

“A national securities exchange should be ‘designed to prevent fraudulent and manipulative acts and practices' and ‘to protect investors and the public interest.'”

They insist on surveillance sharing agreements which would be essential to detect, investigate and deter fraud and market manipulation. The SEC also wanted assurances that at any no time would there be a clause that would impede them from accessing requested market information.

The Winklevoss Bitcoin Trust case

This is not the first instance that Commissioner Hester dubbed the ‘Crypto mom’ has differed with the SEC's popular opinion. In 2018 she dissented the SEC’s decision to reject the proposed rule change that would allow Winklevoss Bitcoin Trust to list and trade their shares on Bats BZX Exchange, Inc.

If bitcoin were an element, would an ETP approval be elementary? https://t.co/5INT46MSsk

— Hester Peirce (@HesterPeirce) February 26, 2020

She cited the disruption of market institutionalization as her main concern. This would essentially delay any advancements in market structure and investor protection. She was positive that increase institutional involvement would help put the Commission at ease with the Bitcoin market.

“That it deprived investors (particularly retail investors) of the ability to access bitcoin in markets within our regulatory framework.”

SEC’s Trend could drive investors away

Hester is worried that the successive rejections of the various ETF’s and SEC’s interpretation of regulatory standard would send the message that innovations weren’t welcome. This threatens to drive investors away with the opportunities they come with to other friendlier Jurisdictions.

“The Commission’s actions in this area over the past eighteen months confirm these concerns.”