Alex Wong/Getty Images
- The SEC rejected the approval of a long-awaited spot bitcoin ETF from VanEck on Friday.
- The regulatory agency said a proposed rule change did not satisfy its concerns about fraudulent and manipulative practices in the cryptocurrency space.
- The SEC approved a bitcoin ETF last month that invests in futures contracts rather than the underlying cryptocurrency.
The Securities and Exchange Commission rejected the application for a long-awaited spot bitcoin ETF from VanEck on Friday as it remains concerned about potential fraud and manipulative practices in the cryptocurrency space.
The order, released Friday morning, said a proposed rule change filed by the Cboe BZX Exchange earlier this year to list and trade shares of the VanEck Bitcoin Trust did not meet "its burden under the Exchange Act and the Commission's Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5)."
Specifically, the proposed rule change didn't meet the requirement that "the rules of a national securities exchange be 'designed to prevent fraudulent and manipulative acts and practices' and 'to protect investors and the public interest," the SEC said.
The ruling is consistent with recent comments from SEC Chairman Gary Gensler, who was preferred the introduction of a futures-based bitcoin ETF rather than one that invests directly in the underlying cryptocurrency.
The ProShares Bitcoin Strategy ETF was the first futures-based bitcoin ETF to launch last month and became the fastest ETF ever to amass more than $1 billion in assets, signalling that there is real demand for bitcoin among investors.
But higher transaction costs related the monthly rolling of bitcoin futures contracts could result in subpar returns for investors in the futures ETF relative to directly owning the cryptocurrency. That's why investors are eager for a bitcoin spot ETF, similar to gold and silver ETFs that hold the underlying physical commodity.