SEC Rejects 9 Bitcoin ETF Applications. Crypto Markets Sag in Response.

Bitcoin (BTC) has lost about US$100 on the day as the U.S. Securities and Exchange Commission (SEC) rejected several Exchange-Traded Fund (ETF) applications late yesterday.

The world’s preeminent cryptocurrency has since rebounded slightly, but all of the other major digital tokens are currently in the red.

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The SEC gave the much-awaited ruling on the pending Bitcoin ETF proposals on Wednesday, and it's not the news cryptocurrency industry was hoping for.

According to CNBC, the agency rejected all the nine Bitcoin ETF proposals filed by ProShares, Direxion, and GraniteShares in three separate orders.

While all the three ETF providers gave their own reasoning for why a BTC ETF should be granted, the SEC has rejected them on common grounds. The agency noted that the rejection doesn’t have anything to do with whether Bitcoin and blockchain technology have utility or value as an innovation or an investment.

For all three disapprovals, the SEC stated:

"[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission's Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange's rules be designed to prevent fraudulent and manipulative acts and practices."

The SEC also cited the inability of the exchanges to prove that BTC futures markets are “markets of significant size” as the other reason to reject the proposals.

The SEC went on to say that it’s important Bitcoin futures markets are of significant size, because the exchanges failed to prove their capability to prevent fraud and manipulation through others means. Therefore, “surveillance-sharing with a regulated market of significant size related to Bitcoin” is required to satisfy the legal requirements of preventing fraud and manipulation in the ETF trading.

The SEC now has a deadline of August 23rd to decide on making a decision on two remaining ETF applications from ProShares along with the New York Stock Exchange (NYSE) Arca.