Bitcoin’s price plummeted after US regulators rejected a proposal by Cameron and Tyler Winklevoss for a publicly traded fund based on the digital currency, dashing hopes that a government-approved investment vehicle would lead to wider interest in virtual money.
The US Securities and Exchange Commission (SEC) refused to grant an exemption that would have let the Winklevoss Bitcoin Trust (Coin) trade on the Bats BZX Exchange, according to a filing posted on Friday on the regulator’s Web site.
The decision ended a months-long rally that pushed the virtual money’s value higher than gold. Bitcoin fell as much as 18 percent against the US dollar to US$978.76 after the decision, its lowest intraday price in one month.
Tyler and Cameron Winklevoss, the twins famed for their dispute with Facebook Inc chief executive Mark Zuckerberg over the origins of the Web site, vowed to continue working with the SEC to make their bitcoin vision a reality.
They have been engaging with regulators and tweaking their proposal for years.
Friday’s decision does not close the door on a possible exchange-traded fund (ETF) based on bitcoin, but it makes the path more complicated.
The SEC rejected the application because the Bats exchange would be unable to enter into necessary surveillance-sharing agreements given that “significant markets for bitcoin are unregulated,” according to the filing on the agency’s Web site.
“The Commission does not find the proposed rule change to be consistent with the Exchange Act,” the filing said.
Bitcoin is not regulated by any government and has been used by consumers worldwide to shelter assets from inflation or political upheavals in their home countries. Last year, bitcoin outperformed all major foreign-exchange trades, stock indexes, currencies and commodity contracts.
After bitcoin’s initial plunge on the news, the currency pared losses to 8.3 percent at 5:11pm in New York on Friday.
“We remain optimistic and committed to bringing ‘coin to market, and look forward to continuing to work with the SEC staff,” Tyler Winklevoss said in a statement. “We began this journey almost four years ago, and are determined to see it through. We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors.”
Two other bitcoin ETFs under regulatory review — Bitcoin Investment Trust and SolidX Bitcoin Trust — filed more recently, in January and in the middle of last year, respectively.
The SEC staff’s wording in the decision could also spell trouble for the others, Blockchain Capital head of research Spencer Bogart said.
“The reasons for disapproval appear unrelated to specifics of the Winklevoss filing and therefore this announcement is a negative indicator for the prospects of the other bitcoin ETFs,” he said.
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