Recently, the world of cryptocurrency witnessed the Security Exchange Commission making one of the most-awaited decisions. The news was related to SEC’s approval for the creation of Exchange Trading Fund (ETC) but unfortunately, investors had to face disappointment. The SEC clearly rejected the creation of ETC, crushing the hopes of many investors.
The Reason behind SEC’s Rejection of ETF
To support the crucial decision, SEC cited the ‘fraud possibility’ – something that has been attached to cryptocurrency since its inception. The commission clearly turned down the idea of altering the rules of stock exchange for the creation of a bitcoin fund.
According to the commission, the proposal was conflicting and at odds with the SEC requirements, which held it accountable for the prevention of manipulative and fraudulent acts. The commission said that our institution is designed to alleviate such practices in order to fully protect the common interest of public and investors.
SEC’s Rejection and the Bitcoin Prices
The SEC’s decision regarding the creation of ETF has plunged the prices of bitcoin remarkably. If SEC would have approved the creation of ETF, it would have created a much more flexible environment for bitcoin trading but alternatively, the price of bitcoin has now increased.
While in the anticipation of approval, the prices broke at almost $1,300 last week, they fell sharply and reached around $1,050.
The decision of SEC did not turn out to be positive for the supporters of the cryptocurrency. If the ETF would have received the approval, it would have opened many doors for institutional investors as well as retail investors interested in bitcoin trading.
According to investment expert at Alston & Bird, Blake Estes, the SEC ruling represents a dim view of commission towards the possible success of ETF in bitcoin trading.
He further stated that after analyzing the reasons of SEC to disapprove the creation of EFT, this can be concluded that SEC does not believe that bitcoin still holds the structural protection or necessary controls to fully support a product like EFT.
With this decision, it is least likely that the other two ETFs pending with SEC will get the approval. These two ETFs are also likely to fail in getting an approval from the SEC and enabling the commission to understand the strong structure of bitcoin market. The bitcoin future is definitely promising but the SEC seems to have decided that the emerging cryptocurrency is not yet acceptable or right for the retail investors dealing publically in the US.
The SEC’s Rejection is Not the End
However, the decision of SEC is not exactly the end of the story. There are many companies which are ready for the proposals of Exchange Trading Fund even before Security Exchange Commission. While this could make the commission to grant EFT approval, but the SEC’s decision suggests that the commission is highly skeptical of the cryptocurrency’s sustainability and might take long to grant an approval.