The Public Reveals They Are Displeased with Recent ETF Application, Giving SEC 84% Negative Feedback
In February 2019, the Securities and Exchange Commission had solicited the public to provide feedback on an application for a Bitcoin exchange-traded fund. According to statements from the SEC, they have received back seven comment letters so far, and six of those letters encouraged the authority to reject the application.
Though the cryptocurrency industry seemed to be on board with a Bitcoin ETF as an effort to bring in new institutional investors, that interest is not being conveyed to the SEC, if it is still there at all. Dina Pinto, for example, wrote that Bitcoin lacks “solid ground” to base the ETF on, adding that it is “volatile” and “manipulated by the very few.” She said that Bitcoin lacks a use case, and she believes that there are many people at risk of “getting hurt both financially and in other ways.”
D. Darnwell, who wrote one of the letters, does not approve of the ETF either, saying that the best approach for the SEC would be to “watch and wait” for Bitcoin to become a more positive financial product. Darnwell urged the SEC to deny the proposal “without hesitation.”
Sami Santos took a different path, saying that there is “no reason not to approve” the proposals from VanEck and Bitwise. Santos recognized that much of the apprehension has to do with the manipulation in the market, though the protection of the investors is implied within the new product.
In September last year, when the potential for the Bitcoin ETF was proposed via VanEck SolidX Bitcoin Trust, and the SEC saw over 1,400 comment letters come in, which were mostly positive. However, the bear market has done a lot of damage to that enthusiasm. VanEck and Chicago Board Options Exchange (CBOE) had resubmitted their applications as a result of the massive government shutdown, since the lack of review would’ve led to automatic denials.
Now, it looks like they are facing the same fate, unless more proponents decide to write to the SEC. However, based on the reception it has gotten so far, the likelihood of seeing approval for a Bitcoin ETF before the last quarter of the year is pretty low.
In statements from SEC chairman Jay Clayton, there has not been a dominant stance he has taken on cryptocurrency, but his big concern has been the potential for market manipulation. Still, he believes that there could be a circumstance where the Bitcoin ETF would fulfill what the SEC wants to see. Everything relies on proving that trading is not manipulated, and that custody could be “something we can feel comfortable about.”
To view any or all of the letters, visit the SEC official website. Visitors are able to select the letters of Sami Santos, D. Barnwell, Anthony Darwin, Avinash Shenoy, Sarah Malone, Dina Pinto, and Sam Ahn (Hana Trading USA Inc.).