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U.S. SEC rejects Wilkshire Phoenix’s bitcoin-based exchange-traded fund

Image by United States Securities and Exchange Commission Facebook

Thu, 27 Feb 2020, 09:16 am UTC

The U.S. Securities and Exchange Commission (SEC) decided to reject the latest bid for a bitcoin-based exchange-traded fund (ETF).

In a filing posted on Wednesday, SEC denied the ETF bid made by the New York-based financial service start-up Wilkshire Phoenix because it fails to prove that the bitcoin market is sufficiently resistant to market manipulation. The company applied for an ETF last summer through NYSE Arca, Inc.

"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," the filing read.

The regulators also concluded that NYSE Arca failed to establish that an actor trying to manipulate the proposed ETP would reasonably likely to trade in the CME bitcoin futures market and that it has a surveillance-sharing agreement with the Constituent Platforms or that the Constituent Platform constitutes a regulated market of significant size related to bitcoin.

SEC explained that the disapproval has nothing to do with the evaluation of bitcoin or blockchain technology but because NYSE Arca fails to demonstrate that its proposal is coherent with the requirements of Exchange Act Section 6(b)(5).

Meanwhile, SEC Commissioner Hester Peirce, popularly known as “crypto mom”, said that the agency applies a “heightened standard” to bitcoin products. She said that SEC had not required surveillance-sharing agreements with markets of significant size.

“This line of disapprovals leads me to conclude that this Commission is unwilling to approve the listing of any product that would provide access to the market for bitcoin and that no filing will meet the ever-shifting standards that this Commission insists on applying to bitcoin-related products—and only to bitcoin-related products,” she wrote, Coindesk reported.

The publication noted that SEC has rejected all previous bitcoin ETF proposals they received to date. Last year, SEC also published a rejection letter for Bitwise Asset Management’s bitcoin ETF proposal.

Meanwhile, SEC has warned investors against initial exchange offerings (IEOs) because it can be used improperly and may be conducted in violation of the federal securities laws.

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