A tidal wave of criticism directed at the U.S. Securities and Exchange Commission (SEC) has erupted from an unexpected source: Cameron Winklevoss, co-founder of the crypto exchange Gemini. Winklevoss claims that by continuously denying applications for Bitcoin exchange-traded funds (ETFs), the SEC is unwittingly steering investors towards high-risk, unregulated crypto products.
It has been a decade since the Winklevoss twins first applied for their own Bitcoin ETF to be approved by the SEC, yet there has been no positive response. As a result, Winklevoss asserts that investors are being funneled into "poisonous" products like the Grayscale Bitcoin Trust (GBTC). The GBTC's trading price is currently at a 30% net asset value discount compared to Bitcoin's price, which Winklevoss warns is excessively disproportionate.
But it is not just the price disparity that is troubling. GBTC also charges an "astronomical" 2% annual fee, starkly contrasting the average of 0.40% reported in a July 2022 study by financial services firm Morningstar.
Even more concerning, Winklevoss argues, is the shift of American investors towards "unlicensed and unregulated" offshore platforms like FTX. He even goes so far as to label this phenomenon "one of the largest financial frauds in recent history."
On the contrary, the SEC's persistent refusal to approve Bitcoin ETFs is drawing fire from a range of organizations. Numerous firms such as BlackRock, Fidelity, WisdomTree, Invesco, Valkyrie, and ARK Invest have recently sought to get a spot Bitcoin ETF approved, amended, or renewed.
The SEC, however, maintains its stance that the current applications for Bitcoin ETFs are "insufficiently clear and comprehensive." The regulator's response to the fund managers? Improve the language of your filings and try again.
Amidst this raging storm, Gemini is embroiled in its own court battle with Genesis, a subsidiary of the Digital Currency Group (DCG), which also owns Grayscale. Not to mention, Gemini is also answering charges from the SEC.
In sum, Winklevoss is urging the SEC to shed its self-proclaimed economic gatekeeper role and focus on fulfilling its mandate of investor protection.