Toshi Times has previously covered how the US Securities and Exchange Commission recently rejected a proposal for a Bitcoin-oriented exchange-traded fund (ETF).

The proposal was originally filed by Bats BZX Exchange, and sought to list and trade shares of the Winklevoss Bitcoin trust.

At the time, we reported that the Commission seemed split on the decision, as the Commission’s refusal of the ETF was not unanimous, with one commissioner voting in favor of approving the Winklevoss-backed Bitcoin ETF.

More light has just been shed on this, however, as Commissioner Hester M. Peirce has published a lengthy public dissent, where she announced that she ”respectfully” disagrees with her colleagues’ decision to reject listing and trading of the Winklevoss Bitcoin Trust’s shares.

Peirce has stated that she believes that the Commission’s decision ”undermines investor protection by precluding greater institutionalization of the Bitcoin market”.

Her comments have garnered much attention on Reddit, where it has been significantly upvoted and discussed.

Some of the comments in the Reddit thread have suggested that the SEC’s main gripe with a cryptocurrency ETF would be that the cryptocurrency market is by nature virtually impossible to control.

Whilst it is impossible to know the SEC’s true reasoning for rejecting the ETF, Peirce also argues that the Commission’s official reasoning does not hold up to scrutiny.

For one, Peirce notes that the Commission cited inconsistencies with Section 6(b)(5) of the Securities Exchange Act of 1934 – which relate to prevention of fraudulent and manipulative acts, as well as investor protection – in its refusal of the ETF.

However, Peirce argues that the Commission did not focus its decision ”on the ETP [exchange-traded product] shares to be listed on the exchange but on the underlying Bitcoin spot market”.

According to Peirce, Section 6(b)(5) should determine whether ”[t]he rules of the exchange are […] designed to prevent fraudulent and manipulative acts and practices” which the Commission did not do.

Rather than evaluate the Bitcoin spot market, Section 6(b)(5) should have the Commission focusing on the ability of the Batz BZX Exchange. Moreover, Peirce stated that she ”[is] persuaded that the rules of the exchange satisfy the Section 6(b)(5) standard”.

Most notably, this SEC publicly stated that its decision not to green-light the ETF did not have anything to do with Bitcoin, rather relating to the ETF. Peirce’s comments would seem to directly contradict this claim.

Furthermore, Peirce also went on to argue that disapproving the ETF inhibits institutionalization of the Bitcoin market – something which she stated she believes would mitigate the very problems cited by the SEC.

In addition to this, Peirce also noted that the SEC’s disapproval order ”dampens innovation”, which she argues could, paradoxically, have ”an adverse effect on investor protection, efficiency, competition, and capital formation well beyond this particular product”.

Peirce concluded her lengthy public dissent statement by stating that although Bitcoin could ultimately either succeed or fail, the Commission is supposedly ”not well positioned to assess the likelihood of either outcome”.

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