When the US Securities and Exchange Commission (SEC) earlier rejected the Winklevoss‘ Bitcoin ETF proposal, not everyone was happy. Many players in the market questioned the rationality behind the rejection. This was because of the appealing benefits Bitcoin ETFs could spruce up the US investment market with.
Previously, the SEC explained their rejection of the Bitcoin ETF as based on statutory violations. At the same time, the SEC emphasized that the issue was Bitcoin ETFs depended on derivatives of the Bitcoin futures markets operated by the CME Group in collaboration with the Chicago Board Options Exchange (CBOE). Both institutions made revisions to their ETF proposals to use US futures markets as the standard price of the ETF. This was because the government rejected the dependence of the Winklevoss’ Bitcoin ETF on the price on prices listed by Gemini. Gemini is a cryptocurrency exchange based in the United States.
A Brisk Turnaround For The SEC
However, in a turnaround which sparked enthusiasm all around, the SEC announced its decision to review its previous ruling. SEC secretary, Brent Fields, sent a letter to NYSE Group senior counsel David De Gregorio about the development. An excerpt from the letter reads, “This letter is to notify you that, pursuant to Rule 43 I of the Commission’s Rules of Practice, 17 CFR 20 I .43 1, the Commission will review the delegated action. In accordance with Rule 431 (e), the August 22 order is stayed until the Commission orders otherwise.”
Nothing Concrete to Celebrate Yet
Commissioner Hester Peirce is the driving force behind the slated review. From the way SEC operates, just a single commissioner has the power to order a review. While the investment community is drooling in excitement over the review, there is yet need for restraint. In light of this, a renowned government enforcement defense & securities litigation attorney at Kobre Kim LLP, Jake Chervinsky, called for investors not to get ahead of themselves in excitement.
Chervinksy is quite bearish that a review may necessarily not result in reversing the rejection. He cautions, “Don’t get too excited, folks. Under Rule 431 of the SEC’s Rules of Practice, it only takes a single Commissioner to order a review like this. Congress hasn’t given SEC regulatory authority, so they’re essentially trying to coerce ETF sponsors into surveilling the market for them.”
Still Some Ugly Truth in the Pessimism
There is quite some truth in Chervinsky’s pessimism that the reversal wouldn’t see a quick upheaval by the SEC. The SEC still violently argues that the US futures market at present lacks the size for ETFs to base their price on futures exchanges.