A commissioner of the U.S. Securities and Exchange Commission (SEC) has voiced her opinion that the agency overstepped its bounds to reject a bitcoin ETF recently based on the underlying asset, bitcoin. She believes that the role of the SEC is to consider the market for the ETF, not the underlying asset itself.
Following the SEC’s recent decision to reject the proposed rule change for a bitcoin ETF, SEC Commissioner Hester Peirce voiced her opinion in an interview with Cnbc on Wednesday. She explained that the agency has no jurisdiction to look at the underlying asset when considering whether to approve a proposed rule change for an ETF.
While Peirce voted for the approval, three other commissioners voted against. She explained that her colleagues cited “a number of reasons for that decision, and specifically what I think they did is they looked through to the underlying asset – in this case, that would be bitcoin, and they raised some concerns about the market for that underlying product.” She asserted:
I think by doing that they went beyond what the statute allows us to do and we should have really focused on the market where the exchange-traded product would trade as opposed to focusing on the underlying bitcoin markets.
During the interview, she was asked, “One of their [SEC’s] concerns is that there may be price manipulation in bitcoin, the underlying asset, and what you are saying is that the SEC has no jurisdiction to look at the underlying asset, is that correct?” Peirce replied, “that’s correct.”
She then elaborated that, just like with other underlying assets such as gold or oil, “it’s not within our purview to go and look at how those markets are actually working. We should be focused on the market that’s trading the security which in this case would be the exchange-traded product.”
Rejecting Bitcoin ETF
Regarding the SEC’s recent decision to reject a bitcoin ETF, Peirce noted that her colleagues went through an analysis and concluded that the proposed rule change is not consistent with the Securities Exchange Act. However, Peirce clarified:
I take the position that actually the change that was before us was consistent with the Exchange Act. There’s no reason for us not to allow this product to go ahead and trade on the exchange so I would have let it go forward whereas my colleagues believed that it should not go forward.
Vaneck/Solidx Bitcoin ETF
Currently, the SEC is considering whether to approve the proposed rule change filed by Cboe BZX Exchange to list and trade shares of Solidx Bitcoin Shares issued by the Vaneck Solidx Bitcoin Trust. This proposed rule change was published for comment in the Federal Register on July 2.
Peirce explained that the SEC staff will make a decision on the rule change. They are required to take action within 45 days after the date of the publication in the Federal Register. However, the agency or the exchange can extend the deadline for another 45 days.
Furthermore, the SEC may “institute proceedings to determine whether to disapprove a proposal, in which case the Commission is required to take final action to approve or disapprove a proposed rule change no later than 240 days after the proposal is published in the Federal Register,” the agency wrote:
If the Commission fails to meet any of the deadlines for final action on a proposed rule change, that proposed rule change is, pursuant to the Exchange Act, deemed to have been approved by the Commission.
What do you think of the SEC looking at bitcoin to make its decision on bitcoin ETFs? Let us know in the comments section below.
Images courtesy of Shutterstock, Hester Peirce, and the SEC.
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