SEC Will Review Its Decision To Reject Nine Bitcoin ETFs

On Thursday, August 22, the office of the secretary of the U.S. Securities and Exchange Commission (SEC) issued a formal letter stating that the agency has decided to reconsider its decision regarding the rejection of nine Bitcoin ETFs proposed by Direxion, ProShares and GraniteShares.

The letter was signed by SEC secretary Brent Fields and was addressed to NYSE Group senior counsel David De Gregorio. It noted: "This letter is to notify you that, pursuant to Rule 43 I of the Commission's Rules of Practice, 17 CFR 20 I .43 1, the Commission will review the delegated action. In accordance with Rule 431 (e), the August 22 order is stayed until the Commission orders otherwise. The Office of the Secretary will notify you of any pertinent action taken by the Commission," Fields added.

However, this news about reconsidering the decision was announced by SEC Commissioner Hester Peirce through her Twitter account where she said: “Yesterday's staff orders disapproving SRO rules related to a number of bitcoin ETFs are stayed pending Commission review.”

Commissioner Peirce also explained the further steps the agency would be taking in another tweet stating: "In English: the Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff's action, as will now happen here.”

Earlier this month, Commissioner Hester Pierce had also refuted SEC’s decision to reject the Bitcoin ETF proposal from Winklevoss twins . Peirce published a formal dissent of the SEC website where she made an attack on the agency’s over-involvement in deciding the merit of Bitcoin and said that the agency role is not to determine into the future of Bitcoin and whether it will succeed or not.

She said: “The Commission’s mission historically has been, and should continue to be, to ensure that investors have the information they need to make intelligent investment decisions and that the rules of the exchange are designed to provide transparency and prevent manipulation as market participants interact with each other. The Commission steps beyond this limited role when it focuses instead on the quality and characteristics of the markets underlying a product that an exchange seeks to list.”

A day before on Wednesday, the SEC had rejected those nine Bitcoin ETFs which were connected to the Bitcoin futures instead of directly holding the digital currency. While reasoning its rejection, SEC said that extremely low volumes in the Bitcoin futures and derivates market in the last few months subject the ETF products to high risks of manipulation and fraud and the three companies fails to address these issues properly.

The SEC noted: “Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.”