March 31, 2017
By: Mike Dautner
It’s the second time in recent memory a bitcoin exchange traded fund (ETF) has come before the United States’ Securities and Exchange Commission (SEC), and for the second time, it’s been shut down. This time, it was the SolidX Bitcoin Trust, brought forward by the Intercontinental Exchange Inc.’s NYSE Arca exchange, and the reasons behind the shutdown will likely be familiar to those who have been following this concept.
The SEC’s reasons for shutting down this exchange boiled down to roughly the same as the last time, with issues of regulation and oversight coloring the concept. The SEC noted, based on Section 6(b)(5) of the Exchange Act, that new exchanges were required to boast rules that “…prevent fraudulent and manipulative acts and practices…” as well as serving “…to protect investors and the public interest.”
The first time a bitcoin exchange got shut down, it was a kick in the teeth for bitcoin prices, which suffered greatly. A loss in price was seen this time as well, though nowhere near so pronounced, suggesting that losses at the SEC were now baked into the cost of bitcoin, currently hovering around $1028.51 as of this writing.
One one more such proposal remains outstanding to date: Grayscale Investments LLC’s Bitcoin Investment Trust, seeking to enter the fray with $500 million on its side. Given the last two, it’s not likely this one will pass.
In fact, given the nature of bitcoin altogether, it’s likely that it will never clear the SEC. The very nature of bitcoin—a highly decentralized operation that isn’t controlled by any one government entity—suggests that it can never be approved under the SEC’s rules, though several are taking their best shot.
It really doesn’t matter, though, if bitcoin never makes the SEC rosters and becomes a formal ETF. It’s operated this long without such issues as an investment property and even as a kind of mobile payment electronic currency.
So while bitcoin may never be taken seriously on the exchanges, it doesn’t need to be. It’s enough to stand on its own two feet, serving as investment, speculation, and paycheck all in one.