Once again, the Securities and Commodities exchange has dashed all hopes of ever having shares of a bitcoin exchange-traded fund (ETF). According to a filing on Feb 26, the SEC revealed that it had denied the Wilshire Phoenix proposal on the grounds that the firm did not provide sufficient evidence showing that the bitcoin market is immune to manipulation.
Notably, the regulator has rejected all other ETF proposals filed in the past. The Wilshire Phoenix one becomes the latest bitcoin ETF proposal to bite the dust.
Wilshire Phoenix ETF Proposal Rejected
A bitcoin ETF has been viewed by many as a great opportunity for interested investors to gain exposure to bitcoin without having to hold the cryptocurrency, potentially boosting the asset’s price. Now, it seems like this will remain a pie in the sky.
SEC has received several bitcoin ETF proposals in the past including the Bitwise proposal, VanEck-SolidX proposal, and the Winklevoss twins proposal. If you can recall, the SEC denied both the Bitwise and Winklevoss proposals. The SEC later announced that it was taking a second look at Bitwise’s proposal. However, Bitwise tacitly withdrew its proposal days before SEC announced its decision.
With all the rejections, SEC cited concerns of market manipulation as the main reason for their decision. It was no different with the Wilshire Phoenix proposal, which was the last bitcoin ETF rule change proposal under the review of the agency.
The SEC filing read in part:
“The Commission concludes that NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b) (5), and, in particular, the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices’ and ‘to protect investors and the public interest.’”
Wilshire first filed its application for a bitcoin ETF with exchange NYSE Arca last June. In order to boost its chances of getting SEC approval, the firm posited that its ETF would be comprised of both Treasury bills and bitcoin. This was intended to, in part, help better deal with bitcoin’s immense volatility.
The agency had postponed the decision for this particular ETF a couple of times last year before finally rejecting it on Wednesday.
The Silver Lining
With the Wilshire Phoenix ETF proposal disapproved, it is highly unlikely that we will be seeing a bitcoin ETF in 2020. Which begs the question: does the crypto market really need a bitcoin ETF?
Many in the cryptocurrency space have concluded that a bitcoin exchange-traded fund is no longer as crucial as it was a few years back. The cryptocurrency market has matured considerably and now has infrastructure like Fidelity Investments custody and CME and Bakkt futures contracts that offer investors something akin to what ETF’s would offer.