In a somewhat expected move, the Securities and Exchange Commission (SEC) has rejected an attempt by ProShares to list what would have been the world’s first Bitcoin ETF. The rejection was released today, 22nd August, on the sec.gov website. ProShares’ proposed ETF was to be based on Bitcoin future contracts rather than any direct holdings of BTC, unlike the Cboe ETF proposal which is due to be decided upon or extended in September of this year.
ProShares ETF proposal was initially put forward in December of last year. The filing states that ProShares’ ETF would be backed using Bitcoin future contracts from the CME or Cboe Futures Exchange:
“According to the Registration Statement, the investment objective of the Fund is to seek, results (before fees and expenses) that, both for a single day and over time, correspond to the performance of lead month bitcoin futures contracts listed and traded on either the Cboe Futures Exchange (“CFE”) or the Chicago Mercantile Exchange (“CME”)”
The SEC Explain Reasoning For Denial
In the SEC’s filing, they state that:
“the 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.”
Interestingly, the SEC states that their decision “does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment”.
“This order disapproves the proposed rule change. Although the Commission is
disapproving this proposed rule change, the Commission emphasizes that its disapproval does
not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility
or value as an innovation or an investment.”
Investors More Hopeful About Cboe ETF
The denial of the ProShares ETF by the SEC was as an expected move. Many investors and thought-leaders in the cryptocurrency space believed that approval was extremely unlikely due to its future contract-based backing. Cboe’s proposed ETF, on the other hand, intends to hold actual Bitcoin. Cboe has also taken steps to purposely price shares out of reach for the vast majority of retail investors, leading many experts to believe that the Cboe product, offered through VanEck SolidX Bitcoin Trust, is far more likely to gain approval from the SEC.
Why Does Bitcoin Need an ETF?
After a considerable drop from all-time-highs of almost $20,000 in December of last year, Bitcoin entered a bear market which has seen lows of under $6,000, over 70% losses for investors who bought into Bitcoin at the peak of the previous bull market.
A study at the start of this year, as reported by Bloomberg, suggests that the majority of Bitcoin owners are younger males. Investors believe that an exchange-traded Bitcoin product will entice institutional money into the market and make Bitcoin more available to retail investors who are put off by the technical hurdles involved with owning and storing physical Bitcoin; typically the older generation of investors.