SEC Rejects VanEck’s Bitcoin-Backed ETF

On Friday, regulators in the US rejected yet another attempt to get a bitcoin-based exchange-traded fund (ETF) listed on Wall Street. The regulator cited concerns about the possibility of fraud in the crypto market also affecting regulated exchanges. The application for the VanEck Bitcoin ETF was rejected by the US Securities and Exchange Commission (SEC) due to concerns over the manipulative and fraudulent acts in markets where bitcoin is traded. The SEC added that it had made the decision in the interest of protecting public interest and investors. In the disapproval order, a number of concerns were put forward by the SEC, one of which is ‘wash trading’. 

This is when both sides of the trade involve the same institution. Other concerns include possible price manipulations by bitcoin whales, the manipulative activity associated with the renowned stablecoin Tether and generating high fee for minimal risk. Hopes of crypto advocates have been dampened significantly by the SEC’s rejection, as they had been lobbying for approval of a bitcoin-backed fund to be traded on the regulated US markets. Similar filings have been rejected repeatedly by the regulator in the last eight years. However, expectations had been raised in the previous month when the SEC gave its approval for the first bitcoin futures-based ETF.

Spot crypto ETFs have already received the green light in a number of European countries as well as Canada and the first such product is expected to launch by VanEck in Australia soon. On Wednesday, Bitcoin had surged to a value of $68,676 over expectation of approval of the ETF, as the Sunday deadline for the regulator to reject it drew nearer. The crypto had last been trading at a value of $63,168. Senior SEC officials have shared concerns about the manipulation that can happen in the crypto market and the trading conditions before. Digital currencies are traded on a number of unregulated venues all over the globe.

The chairman of the SEC, Gary Gensler had said last month that the world of crypto finance is like the Wild West, as it is riddled with scams, frauds and abuse. According to US authorities, the primary listing exchange needs to have a comprehensive agreement for a Bitcoin ETF with a large regulated market related to the crypto to allow monitoring for the potential of fraud or manipulation. VanEck was planning on using CBOE Global Markets and the agency said that these requirements were not met. Chief executive of VanEck, Jan van Eck said that they were quite disappointed with the SEC’s decision.

The CEO added that they believe investors should be able to use a regulated investment product for getting exposure to bitcoin and the superior approach is a non-futures ETF. The futures-based ETF that was approved last month has amassed $1.4 billion assets since its launch, which makes it one of the strongest launches in history. This is an indicator of the appetite people have for an ETF exposed to cryptocurrency. The futures contracts held by the fund are traded on the CME Group venue, which is under the monitoring of the Commodity Futures Trading Commission.