The Securities and Exchange Commission recently rejected a Bitcoin ETF. This ETF application was made by Wilshire Phoenix, which is based in New York. The agency’s ruling put an end to the possibility of a Bitcoin ETF being held in the US.

Descent from Within the SEC

However, not everyone in the SEC agrees with this ruling. One commissioner, Hester Pierce, recently accused the SEC of stodginess for the refusal to approve the ETF. According to the SEC, they rejected the application because the crypto market was vulnerable to market manipulation.

Wilshire Phoenix, the investment firm behind the rejected ETF, had made their submission to the NYSE in June 2019. In October, they refiled their application, which included some minor amendments. As a result, the SEC postponed making a ruling on its application.

Recent SEC Bitcoin ETF Decision  

On February 26, the SEC made its ruling. It concluded that the NYSE Arcas had not met the requirements under the Exchange Act as well as the Rules of Practice established by the SEC. As a result, the application did not demonstrate that it had met the requirements of the Exchange Act Section 6(b)(5). In particular, the SEC noted that the requirement for a national securities exchange to be able to prevent fraud and manipulation and to protect the interests of the public and investors.

Wilshire Phoenix now joins VanEck, Winklevoss twins, and Bitwise is a growing list of reject ETFs by the SEC. After the rejection, Hester Peirce, a commissioner at the SEC, expressed her disappointment in the SEC’s rejection of crypto-based ETFs.

She noted that while the applicants had been responsive and made amendments to their application, the commission did not approve their application. As a result, it would appear the SEC was unwilling to offer approval to any ETF tied to Bitcoin. Besides that, she claimed the SEC was using a heightened standard while examining a project based on Exchange Act Section 6(b) when dealing with digital assets.

The section in question deals with examining whether an asset is easy to manipulate. According to the commissioner, this section should be applied to the exchange and not the asset itself. It was for this exact reason that the SEC rejected the Bitwise application in October 2019.

Wilshire Phoenix had hoped to address this issue by including exposure to the Treasury Bills market, which is liquid. In the plans, the United States Bitcoin and Treasury Investment Trust simply called the Trust would rebalance funds between T-Bills and BTC automatically. With this combination, investors would be offered less volatile exposure to the best performing asset class of this decade.

Bitcoin ETF Outlook 

Thus far, Wilshire Phoenix has not commented on their rejection by the SEC. Besides that, they have not announced what they will do next. They might decide to appeal but their chances of success would be slim. The SEC seems determined to ensure that no Bitcoin ETF is launched on its watch. Bitcoin prices would likely need to be very high before the SEC even considers approving a BTC ETF.

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