SEC Rejects VanEck’s Bitcoin ETP, Cites Lack of Fraud Resilience

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  • The U.S. SEC rejected investment manager VanEck’s application to create a spot Bitcoin exchange-traded product (ETP).
  • The SEC alleged that no exchange has demonstrated its fund’s resilience to fraud.
  • Commissioners Mark Uyeda and Hester Peirce criticized the Commission’s decision.

VanEck’s Application Rejected by U.S. SEC

The United States Securities and Exchange Commission (U.S. SEC) yesterday rejected the investment manager VanEck’s application to create a spot Bitcoin exchange-traded product (ETP), reported Reuters. Commissioners Mark Uyeda and Hester Peirce immediately issued a statement criticizing the Commission’s decision not to approve the listing and trading of VanEck’s product on the grounds that since there is no underlying regulated market, VanEck does not have a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot Bitcoin.

Previous Denial for Cboe BZX Exchange Proposal

When Cboe BZX Exchange applied to the SEC last month to list Wise Origin Bitcoin Trust, it was also denied due to inadequate information provided by the exchange in demonstrating that its fund is designed to prevent fraudulent and manipulative acts as well as protect investors and public interest from any cross-market pricing differences caused by arbitrage across different Bitcoin platforms.

SEC Requirement for Market Surveillance Agreement

For months, the SEC delayed making a decision on VanEck’s current, and third, application for an ETP until recently when it concluded that since there is no underlying regulated market, VanEck does not have a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot Bitcoin which meets its criteria for approval of any commodity-based ETPs listed on exchanges.

Criticism from Commissioners

Commissioners Mark Uyeda and Hester Peirce criticized this decision citing that they had previously not required any connection between the spot and futures markets for other commodity-based ETPs while stating that “the Commission is using a uniquely burdensome definition of ’significant‘ in its analyses of spot Bitcoin ETP filings“.

In conclusion, as authorities begin controlling crypto markets further, it may take some time before approval can be granted for crypto spot ETFs listing on exchanges due to stringent requirements imposed by regulators such as providing evidence demonstrating funds’ resilience against fraud or manipulation which requires an extensive surveillance sharing agreement with an adequately sized relevant market.