The US Securities and Exchange Commission (SEC) announced on Friday that it had rejected the application for the VanEck Bitcoin exchange-traded fund (ETF). According to the Financial Times, the disapproval comes when there are concerns over ‘wash trading,’ among other factors like ‘fraudulent and manipulative acts and practices’.
The regulator adds that its decision was based on a need to protect investors’ interests. Moreover, the Financial Times stated that US regulators are concerned that potential fraud on the cryptocurrency market could hit regulated exchanges.
Among the concerns, the SEC raised in the disapproval order included possible ‘wash trading,’ when the same institution is on both sides of the trade, generating extra fees for minimal risk; potential price manipulation by whales who dominate bitcoin; and possible “manipulative activity involving the purported ‘Stablecoin ’ Tether,” the outlet noted.
“We are obviously disappointed in today’s update from the SEC declining approval of our physical bitcoin ETF. We continue to believe that investors should have the ability to gain exposure to bitcoin through a regulated investment product and that a non-futures ETF structure is the superior approach,” Jan van Eck, Chief Executive of VanEck, commented in reaction to the news.
SEC and Crypto ETFs
The announcement cannot be surprising given the history of SEC officials concerned about trading conditions in the crypto market and how it could help bolster frauds, scams and abuse, as Gary Gensler, the SEC Chair, once stated.
At the end of October, the US SEC rejected at least one of the two recent Bitcoin exchange-traded fund (ETF) applications because of the risky nature of the leveraged financial products.
Such an announcement came nearly two days after Valkyrie filed for a leveraged Bitcoin futures ETF and Direxion applied for an inverse fund for bears. Eric Balchunas, Bloomberg’s senior ETF analyst, highlighted the recent rejection reports and said that it would be interesting to see if the US Securities and Exchange Commission let the inverse fund go through.
