SEC Rejects Winklevoss Bitcoin ETF

March 10, 2017

It’s official. The Securities and Exchange Commission did not approve the Winklevoss Bitcoin ETF (COIN).

After sitting in the regulatory pipeline for more than three years, it’s back to the drawing board with the idea of putting the peer-to-peer digital currency in an ETF wrapper.

"We remain optimistic and committed to bringing COIN to market, and look forward to continuing to work with the SEC staff. We began this journey almost four years ago, and are determined to see it through. We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors," said Tyler Winklevoss, CFO, Digital Asset Services.

Going into this much-awaited decision, bitcoin prices had raced to a new record high above $1,300 in anticipation of a SEC “yes” to this fund. But following the news, bitcoin tanked to below $1,000, bleeding more than 18%.

The rejection hinged on the commission’s belief that the proposed fund and its listing on an exchange required more safeguards and more regulatory oversight. Bitcoin is traded on unregulated markets, which prevents the SEC from entering into “surveillance sharing” agreements that, among other things, help stomp out market manipulation, said Spencer Bogart, managing director and head of research at Blockchain Capital.

Prospects Grow Dimmer

The implication here, he says, is that because the disapproval centered on the bitcoin market structure itself—and not on any specific detail of the ETF design—prospects for other bitcoin ETFs to come to market just grew dimmer.

“The decision isn't that surprising,” Dave Nadig, CEO of, added. “Ultimately this is less about what bitcoin is or isn't, and is about the underlying market structure for bitcoin itself. If the SEC doesn't know where the buck stops on a security, it's hard for them to get behind it. Honestly, the whole point of bitcoin is the buck never stops. It's unregulated by design.”

This was a big deal. The Winklevoss Bitcoin Trust would have been the first ETF to offer investors everywhere easy, transparent access to this peer-to-peer, unregulated digital currency that has gathered quite a following since the financial crisis of 2008. That access would have been made possible to anyone without the need to create separate accounts with bitcoin exchanges.

Bogart said adoption and use of bitcoins and its network have already been growing rapidly without the help of the ETF wrapper. Still, a bitcoin ETF would accelerate the already-fast-growing footprint of bitcoins.

Why A Bitcoin ETF Matters

“A bitcoin ETF would be a significant catalyst for a few reasons,” Bogart said. “For one, it would open the gates of bitcoin to institutional capital. Among other things, this could have a profound impact on price.”

Most institutional investors have mandates that allow them to only invest in registered securities, and bitcoin isn’t one, he says. But in an ETF, it would fit that bill. If nothing else, having a bitcoin ETF approved would improve “public perception” and help manage some of the regulatory risk many associate with bitcoin’s unregulated status.

“In addition, retail investors would be able to get exposure to bitcoin directly from their brokerage accounts instead of establishing a separate account with a bitcoin exchange,” Bogart added. “The way to think about ETF approval is as a low-probability catalyst that could accelerate bitcoin’s already-rapid adoption growth.”


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