The Securities and Exchange Commission (SEC) of the United States is set to give Bitwise Asset Management and NYSE Arca another chance. The agency is scheduled to review the proposal of a Bitcoin exchange-traded fund (ETF) that it initially rejected.
According to a Nov.18 notice posted on the Federal Register, the ETF proposal filed by Bitwise and NYSE Arca will return to be reviewed by the SEC. The Commission had rejected it early October on the grounds that it did not meet requirements concerning possible illegal activities and market manipulation.
“Has Not Met Its Burden”
At the time, the SEC said it disapproved of the proposed rule change because NYSE Arca “has not met its burden under the Exchange Act” and the SEC’s Rules of Practice. It highlighted that the proposal did not demonstrate that it can adhere to the mandate that a securities exchange be designed to prevent fraud and manipulative practices.
However, the SEC secretary notified NYSE Arca on Oct. 15 that according to Commission Rule of Practice 431, they will be reviewing the decision made by the Division of Trading and Markets.
The risk of manipulation is one of the SEC’s most significant concerns when assessing commodity-centered ETFs. The SEC order rejecting Bitwise’s proposal stated that the evidence didn’t provide enough proof to support the company’s claims that the actual spot market for BTC, once the bogus or “non-economic” data is removed from the equation, is resistant to manipulation.
However, the decision to review the proposal gives Bitwise and NYSE Arca another chance to push their plan. The Federal Register announcement states that any person or party can file either a statement to support or oppose the Bitcoin ETF program. Any proposals have to be submitted by Dec. 18, 2019.
The SEC also noted that the initial decision rejecting the proposed listing of Bitwise’s exchange-traded fund would remain active while the Commission does the review.
Charles Lu on the Topic
While the news of a review is welcome, some sectors don’t believe the SEC’s decision will change any time soon. Charles Lu, the CEO of Findora, recently stated that the process of gaining ETF approval takes time, so he’s doubtful that anything will change.
Lu said that for a bitcoin ETF proposal to get approved by the SEC, the sponsor would have to show that real price discovery is occurring. It will prove that there’s no market manipulation involved. But the CEO doesn’t think it will happen soon.
As Lu explained, the Commission will demand “surveillance-sharing agreements” with major crypto exchanges. Unfortunately, it’s a requirement that very few foreign-based exchange platforms will be amenable.