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SEC Rejects Two Spot-Bitcoin ETFs, Citing Security Concerns

The SEC raised concerns about preventing 'fraudulent and manipulative acts and practices.'
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The U.S. Securities and Exchange Commission rejected two proposals to offer physically-backed Bitcoin exchange-traded funds,

The SEC said Wednesday that proposals from Valkyrie Investments and Kryptoin failed to meet requirements 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.” 

In its ruling, the SEC emphasized "that its disapproval of this proposed rule change does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment."

Last month, the SEC rejected a proposal to list the country's first bitcoin exchange traded fund, VanEck Bitcoin ETF, because it said it did not meet trading standards “designed to prevent fraudulent and manipulative acts and practices."

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The commission allowed futures-backed Bitcoin ETFs to be offered in October. The ProShares Bitcoin Strategy ETF  (BITO) - Get ProShares Bitcoin Strategy ETF Report, the first U.S. bitcoin-linked ETF, debuted on Oct. 19.

ProShares said in an SEC filing that the fund "seeks to provide capital appreciation primarily through managed exposure to bitcoin futures contracts." 

Proshares does not invest directly in bitcoin.

The number of crypto-tracking investment vehicles worldwide more than doubled to 80 from just 35 at the end of 2020, according to Bloomberg Intelligence data. Assets climbed to $63 billion, compared with $24 billion at the start of the year. 

The SEC is scheduled to make a ruling regarding Anthony Scaramucci’s Skybridge Bitcoin ETF before Jan. 22. Fidelity’s Wise Origin Bitcoin Trust is due to be decided upon before Jan. 27.