The US Securities and Exchanges Commission will review a petition appealing its earlier decision to disallow the Winklevoss brothers’ Bitcoin exchange-traded fund (ETF).
In March, the SEC rejected a rule change to the Bats BZX Exchange that would have allowed the Winklevoss Bitcoin Trust to list a Bitcoin-based ETF.
The SEC posted a notice on its website that it has received a “petition to review the disapproval” of the rule change.
“On March 24, 2017, pursuant to Rule 430 of the Rules of Practice, 10 BZX filed a petition for review of the Disapproval Order. Pursuant to Rule 431 of the Rules of Practice,11 BZX’s petition for review of the Disapproval Order is granted.”
The SEC then invited anyone with an interest in the matter to submit written statements in support or opposition. The deadline for these statements is 15th May 2017.
The exchange itself filed the petition after the initial rejection, on 24th March. It described the SEC’s decision as “clearly erroneous … the standard applied by the Staff is inconsistent with prior approval orders and not required”.
What the ETF Means for Bitcoin
Approval would have legitimized Bitcoin in the eyes of large institutional investors, potentially increasing the market cap. The SEC’s rejection caused the bitcoin price to plunge below $1,000 USD, though it has since recovered.
The SEC said lax KYC/AML practices and a lack of sufficient regulation at bitcoin exchanges were its reason for disapproval. It added concerns over market manipulation on certain cryptocurrency trading platforms.
Many took this to refer to Asia-based, and Chinese exchanges in particular. While these exchanges have implemented strict new compliance conditions recently, some are still experiencing problems dealing with US banks.
Bitcoin’s ‘Malfeasance Culture’
Others speculated that there may be problems with Bitcoin’s business culture overall. A writer named “Charles Chancellor-Mackay” posted an article on Medium calling the SEC’s decision a “stern rebuke of Bitcoin’s backroom dealing, unsavoury culture“.
The article warned the Bitcoin community that it must improve its behavior and reputation, or risk further rejection by regulators. Worse still, the government may actually seek sanction against wrongdoers in the future.
However BZX’s petition rejected this notion, saying “the manipulation concerns in the Order are overstated and largely theoretical.”
While no-one has suggested any wrongdoing by the Bitcoin ETF team, it may be collateral damage from unrelated Bitcoin incidents. Now its supporters are determined to challenge the SEC to defend Bitcoin’s honor if necessary.
Will the appeal succeed? Tell us what you think.
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