October 20, 2019 | Cryptocurrencies | No Comments
The U.S. Securities and Exchange Commission (SEC) finally came out with an official decision to dismiss proposals for creating a Bitcoin ETF market. The rejection though does not come as a surprise to Bitcoin ETF proponents, given the complexity of how cryptocurrency exchanges work via the blockchain technology.
According to legal experts, the SEC’s main worries include the bitcoin market’s high level of potential for fraud and manipulation; whilst regarded by U.S. regulators as an investment tool that is yet too small and still immature to support.
Although Bitwise officials contended in its proposal that the need for a Bitcoin ETF arises from their research findings that 95% of crypto currency tradings are not legitimate, this reasoning did not work to support its case.
What Makes a Bitcoin ETF Different from Bitcoin?
Bitcoin may be the largest digital currency in the crypto money market but is still unregulated, despite its popularity as a digital asset that can be exchanged and traded for profit.
If recognized by the SEC as legitimately traded investment tool, the price of Bitcoin ETF will be monitored and tracked. That way, interested bitcoin investors need only to determine the current price and market performance of bitcoins, without having to own and trade bitcoins just to do so.
An SEC approved Bitcoin ETF eliminates the need to be invested in bitcoin, which comes with worries on how to best deal with the complexities of its storage and security features. Bitcoin digital money is unlike the more common types of ETFs, such as shares of stocks and/or commodities bonds, which simply have investors looking closely at a related price when venturing into buying or selling an ETF commodity as an investment asset.
In becoming a Bitcoin ETF, the cryptocurrency becomes a type of marketable security that investors can buy and trade based on current index price and performance. As such, bitcoin companies will be under SEC’s system of surveillance-sharing agreement, to which they will allow tracking and close monitoring of how the bitcoin digital money is moving in terms of buying and selling activities.
The bitcoin though flows in a largely unregulated environment; making the SEC hesitant to allow a Bitcoin ETF participating as a type of publicly traded investment tool.