Published: Mon, March 13, 2017
Business | By Patricia Jimenez

Bitcoin drops 15% after the SEC rejects the Winklevoss ETF

Bitcoin drops 15% after the SEC rejects the Winklevoss ETF

The digital currency world got long-awaited news from the Security Exchange Commission on Friday-but it wasn't the news that investors hoped to get.

Gemini - the bitcoin exchange operated by the Winklevoss twins and proposed custodian for COIN - is properly regulated in NY state, but only accounts for relatively low trade volumes. If they approve the rule change necessary to offer a Bitcoin exchange traded fund (ETF), the price of the cryptocurrency could skyrocket. At one point, one bitcoin was worth more than an ounce of gold.

The proposed Bitcoin ETF was the brainchild of Cameron and Tyler Winklevoss, twin brothers who once sued Mark Zuckerberg for allegedly stealing the idea behind Facebook from them when they were all students at Harvard. Last year, NY state approved regulations governing a new exchange operated by Gemini for a virtual currency called Ether. First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. "Should such markets develop, the Commission could consider whether a bitcoin ETP would, based on the facts and circumstances then presented, be consistent with the requirements of the Exchange Act".

Two other companies, SolidX and Grayscale Investments, are now awaiting approval by the SEC to list their bitcoin ETFs on the stock market. Bitcoin is undervalued as it is already, and the potential for future gains is very real. "It is reassuring that the SEC did their job in properly protecting the market".

The U.S. Securities and Exchange Commission on Friday dismissed a request by the Winklevoss twins to list the United States' first exchange-traded fund for bitcoin. "We began this journey nearly four years ago, and are determined to see it through".

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Besides COIN, two other bitcoin ETFs are still in the running: SolidX Bitcoin Trust and the Bitcoin Investment Trust (BIT), sponsored by Barry Silbert's Grayscale Investments. Prices fluctuated wildly throughout the day, reaching a low of $1,112.14 and a high of $1,200.38.

A Bats spokeswoman said the exchange was reviewing the SEC's statement and had no further comment.

The regulators have questions and concerns about how the funds would work and whether they could be priced and trade effectively, according to a financial industry source familiar with the SEC's thinking.

"Based on the record before it, the commission believes that the significant markets for bitcoin are unregulated", it continued.

In its ruling the SEC observed that bitcoin lacks regulatory mechanism that guarantees safety of markets and investors.

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