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PassiveBeat: SEC nixes Winklevoss bitcoin ETF plan

Entrepreneur twins immortalised in 'The Social Network' have application to launch a bitcoin ETF rejected by US regulators.

PassiveBeat: SEC nixes Winklevoss bitcoin ETF plan

The Winklevoss twins tossed a COIN in the air and it came down ‘tails you lose’ when the SEC rejected their plans to launch a bitcoin ETF (exchange traded fund).

The US regulatory body on Friday rejected the fund – which had the proposed ticker COIN – after more than three years of deliberation, citing the risk of fraudulent or manipulative acts because of the lack of regulation in major markets.

It seems like everyone has a view on bitcoin. For its proponents, the digital currency is the cornerstone of the new blockchain economy of distributed ledgers and payments. For its opponents, it’s the go-to means of exchange for underground drug dealers and criminals.

It’s certainly volatile. The value of a bitcoin has varied between $415 (£339) and $1,230 (£1,005) over the last year and slumped 18% on Friday after the SEC news.

Pretty well everyone also has a view on Cameron and Tyler Winkelvoss (pictured above) as well.

The Harvard grads/Olympic rowers/tech entrepreneurs first made headlines for suing Facebook founder Mark Zuckerberg, claiming he stole their idea, a dispute immortalised in the film ‘The Social Network.’ Spoiler alert: they settled for some $65 million out of court.

The twins aren’t giving up after their very public ETF set back.

‘We remain optimistic and committed to bringing COIN to market, and look forward to continuing to work with the SEC staff,’ said Tyler Winkelvoss. ‘We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors.’

So did the SEC do the right thing? Many experts agree with the decision.

'The current supply of bitcoin is about $20 billion,' said Hossein Kazemi, senior advisor to the Chartered Alternative Investment Analyst Association. ‘Since the available quantity cannot be increased in the short-run, opening up this much potential access this fast could have created a significant bubble.’

Todd Rosenbluth, director of ETF Research at the CFRA research group, agreed.

‘The historic volatility of bitcoin suggests the risks are high. Unlike other currencies, the demand drivers are less transparent to us,’ he said.

Others, such as Michael Parsons, a bitcoin entrepreneur at the UK Digital Currency Association, remained optimistic and believe that there will eventually be a bitcoin ETF.

‘It is inevitable that the combination of an ETF to bitcoin will happen – I believe within the next 12 months,’ he said. ‘The investment world requires and will demand an easier and safer access to investment in bitcoin through an ETF.’

Parsons believes the SEC is reluctant to approve, too soon, a cryptocurrency like bitcoin that has ‘historically, been closely tied in actualité and public perception to illicit uses, even if that use were small and insignificant in relation to the global economy.’

However Laurent Kssis, director at CEC Capital and an ETF trading consultant, thinks a bitcoin ETF would bring ‘integrity, credibility and transparency at a moderate fee.'

‘There is a lot of attraction to your broker and investor in such a vehicle, without having to go through the heavy administration process of a bitcoin exchange,’ he says.

And while the twins prepare for another tilt at the SEC, hardcore bitcoin fans can already invest through an exchange traded note (ETN) on Nasdaq Nordic in Stockholm, tracking the currency in euros or Swedish krona.

1 comment so far. Why not have your say?


Mar 14, 2017 at 07:20

It would be good to have some more mainstream, well researched articles on ETPs if this Citywire feature is to develop a following as the IT insider series did.

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