SEC commissioner Hester M. Pierce voiced her formal disagreement shortly after the US Securities and Exchange Commission (SEC) denied the application of Cameron and Tyler Winklevoss for a Bitcoin ETF.
SEC Commissioner Hester M. Pierce said in a public statement that the commission was wrong to disapprove the proposed rule change to list and trade shares of the Winklevoss Bitcoin Trust on the Bats BZX Exchange.
She also holds that the proposition manages to abide by the statutory standards and that the Commission should, in fact, permit the cryptocurrency exchange to list and trade the Bitcoin-based exchange-traded product.
Apparently, bitcoin is not ripe enough, respectable enough, or regulated enough to be worthy of our markets. I dissent: https://t.co/gH5zXaKtmj
— Hester Peirce (@HesterPeirce) July 26, 2018
The SEC Failed to Apply the Law Correctly
The SEC commissioner strongly disagreed with the decision of the SEC, outlining that it strongly undermines innovation and investor protection:
I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. […] More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs.
Pierce also holds that the SEC fails to interpret the statutory standards properly, basing its decision on the underlying Bitcoin 00 spot market rather than the ETP shares of the Winklevoss Bitcoin Trust to be listed on the exchange.
In other words, the rejection is based on the characteristics of the Bitcoin spot market rather than on the actual ability of the Bats BZX exchange to properly surveil trading and to deter manipulation in the ETP shares, which are listed on its platform.
According to Pierce, the SEC’s decision inhibits institutionalization and discourages “institutional participants from entering this market.” Furthermore, she added:
…[the rejection] suggests that approval for bitcoin ETPs will come only when bitcoin spot and derivatives markets have matured substantially, yet, at the same time, contributes to further delay in their maturation, as potential institutional investors may reasonably conclude that the Commission will continue to repress market forces for the foreseeable future.
The commissioner outlines that the SEC bases its decision on issues that the decision itself can help to improve – something that showcases the lack of an “efficient vehicle,” which further undermines investor protection.
“It precludes investors from accessing bitcoin through an exchange-listed avenue that offers predictability, transparency, and ease of entry and exit,” she noted.
Pierce also believes that the Commission is positioning itself as the gatekeeper when it comes to judging whether a certain type of technology is ripe and respectable enough to be worthy of the securities market.
By suggesting that bitcoin, as a novel financial product based on a novel technology that is traded on a non-traditional market, cannot be the basis of an ETP, the Commission signals an aversion to innovation that may convince entrepreneurs that they should take their ingenuity to other sectors of our economy, or to foreign markets, where their talents will be welcomed with more enthusiasm.
Interestingly enough, this falls in line with the position of venture capitalist Spencer Bogart, who also expressed similar concerns, saying that “innovation is going elsewhere if the SEC doesn’t get on board soon.”
All Eyes on CBOE
Nevertheless, it’s also worth noting that the Bitcoin ETF application, which got everyone excited is the one filed by Cboe Global Markets in June.
However, we are likely to have to wait quite a while for the final decision. As Bitcoinist reported, legal expert Jake Chervinsky puts the target date for sometime in early March, 2019.
What do you think of Commissioner’s Pierce dissent to SEC’s recent disapproval order? Don’t hesitate to let us know in the comments below!
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