As per the latest notification issued by the SEC, it has extended its deadline for VanEck-SolidX Bitcoin ETF approval. As the news hit the street bitcoin price did see the knee-jerk reaction of selling, but the price plummeting wasn’t severe as it was very much expected. The new date for the decision would now be September 30, 2018
The need for a federally regulated market that can halt price manipulation
According to the latest notification issued by SEC which stated,
“The Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to act on the proposed rule change so that it has sufficient time to consider the proposed rule change”
SEC has been pretty clear with its requirement of having a regulated market that can protect the asset and also provide assurance that the price of the digital asset at the exchange is not manipulated. According to SEC, it’s the most important thing for a Bitcoin ETF to get clearance as without it there could be a lot of investor protection issues. The same was seen in the letter issued by Dalia Blass, the SEC’s director of the division of investment management when she had rejected a Bitcoin ETF in December.
“There are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to investors,”
Even though things are maturing, even the best of crypto exchanges have been hacked or are suspected to hacked. Also, there have been several cases of price manipulation being reported. Recently, A paper released June 13 by John M. Griffin and Amin Shams of the University of Texas suggests that transaction patterns show Tether was “used to provide price support and manipulate cryptocurrency prices.”
This week Wall Street Journal too reported that according to a study conducted, Cryptocurrency price manipulation is carried out by organized “trading groups” using services such as Telegram, to coordinate “pump and dump” schemes have seen traders inflate and crash the prices.
It seems very clear that without the assurance of security and a solution SEC is in no mood to let a Bitcoin ETF go through.
Its deferment, not rejection, as horizon looks brighter
SEC has played safe as it has not rejected the ETF but only deferring it. It definitely doesn’t want to be seen as a villain for something that could be a potential investment instrument and the demand for which is slowly and steadily increase. Also, the latest announcement by Intercontinental Exchange offering a federally regulated market for Bitcoin could be an answer to SEC queries. Even though the expected date of the launch of ICE’s new exchange is close to the end of the year, by September 30th SEC may have a clear idea of how things may unravel.
While VanEck application answered a lot of queries from previous rejections, the ICE’s new venture seems to be providing the answers for investor protection concerns of the SEC. On September 30th the application clearly stands a chance to be cleared.
Will the Bitcoin ETF pass the hurdle on September 30th? Do let us know your views on the same.
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Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.