• The U.S. Securities and Exchange Commission (SEC) has rejected VanEck’s proposal for a Bitcoin spot ETF.
• Two SEC commissioners criticized the regulator’s decision, stating that it applies “uniquely burdensome” rules to crypto products.
• The SEC has rejected multiple proposals for a Bitcoin spot ETF in 2021, 2022, and 2017, citing concerns over market manipulation prevention.
SEC Rejects VanEck Proposal for Bitcoin Spot ETF
The U.S. Securities and Exchange Commission (SEC) has once again rejected VanEck’s proposal for a Bitcoin spot ETF, according to a March 10 filing. The relevant filing indicates that the SEC has rejected a rule change through which Cboe BZX Exchange intended to list VanEck’s exchange-traded fund (ETF). The SEC previously denied similar proposals for a VanEck Bitcoin spot ETF in 2021 and 2017. It also delayed a decision on the product multiple times.
Concerns Over Market Manipulation Prevention
The core issue, according to the SEC, is that ETF providers have not shown that they can prevent market manipulation. Specifically, those providers have not shown that they have a surveillance-sharing agreement with a significantly-sized market. The SEC has also rejected competing proposals from other firms such as Wisdomtree, ARK Invest, and Valkyrie Investments on virtually identical grounds due to similar concerns over market manipulation prevention.
Though the SEC’s reasoning has been applied repeatedly, two SEC commissioners — Hester Peirce and Mark Uyeda — criticized the regulator’s decision today. They noted that it has been six years since the SEC rejected the first application for a spot Bitcoin exchange-traded fund or exchange-traded product (ETP). Though the SEC claims it applies the same rules to other ETP proposals, Peirce and Uyeda say that its rules for Bitcoin spot ETPs are in fact „uniquely burdensome.“
Uniquely Burdensome Rules
Specifically, they argue that the SEC’s rules for determining a „significant“ market usually apply to a particular trading venue, not an overall market. They also say that the SEC applies a two-part test: first, whether someone attempting to manipulate the market would also need to trade on the relevant market so that surveillance measures are effective; second, whether ETP trading would be a predominant influence on prices in the relevant market – both criteria only applied to crypto products according to Peirce and Uyeda.
Despite repeated rejections from regulators of these applications thus far due to worries over potential manipulation of markets by malicious actors if approved; debate continues between proponents of approving these applications who point out potential benefits such as increased institutional investments into cryptocurrencies as well as those concerned about possible risks associated with such approvals like increased volatility or even frauds targeting investors more easily than ever before possible with traditional stocks/equities etc..