SEC Postpones WisdomTree Bitcoin ETF Decision

The Securities and Exchange Commission (SEC) has postponed ruling on a Bitcoin ETF proposal. A decision on the WisdomTree Bitcoin Trust proposal, which was filed in March, was expected this month but the agency said it would rule on the proposal by July 14. The proposal is among a dozen Bitcoin and cryptocurrency ETF applications filed by the likes of Fidelity and VanEck sitting with the SEC. Rulings on these proposals are expected at different times this month and the next. In its ruling for WisdomTree’s application, the agency said it needed “sufficient time to consider the proposed rule change and comments received.”

The SEC’s decision to postpone ruling on a Bitcoin ETF dovetails with SEC Chief Gary Gensler’s Congressional testimony last week during which he said that “there are many challenges and gaps for investor protection in [crypto] markets.” As example, he said that the volatile trading figures at crypto exchanges were not audited or reported to a regulatory agency. His agency had previously explained its concerns regarding Bitcoin ETFs in a 2018 letter. Among the agency’s concerns were lack of liquidity in the Bitcoin futures markets and price manipulation at underlying cryptocurrency exchanges used to set prices for Bitcoin futures.

A Change in Circumstances

That letter was published in the wake of a run up in Bitcoin and cryptocurrency prices and launch of Bitcoin futures at CME and Cboe. Liquidity was thin in the Bitcoin futures market and there was not much transparency about operations at cryptocurrency markets.

Since then, Cboe has shut down its futures contracts but CME Bitcoin futures are thriving with daily trading volume worth more than $1 billion. Coinbase, North America’s biggest cryptocurrency exchange by trading volume, is listed on NASDAQ. While it is not directly regulated by any agency, the exchange has already come under the regulatory scanner. In March this year, it paid $6.5 million in fines to the Commodity Futures and Trading Commission (CFTC) for inaccurate reporting and wash trading practices on its GDAX exchange.   

According to commentators, the agency is using ETF approval as leverage to get more oversight and regulation over cryptocurrency exchanges. In past remarks, Gensler – who taught a course on blockchain and cryptocurrencies at the Massachusetts Institute of Technology – has indicated that he is in favor of more regulation for the cryptocurrency ecosystem.

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