SEC bitcoin ETF rejection shows market ‘not ready’ – Timo Lehes

SEC bitcoin ETF rejection shows market ‘not ready’ – Timo Lehes

By - min read
  • SEC has yet to approve a crypto spot exchange-traded fund
  • The regulator’s work is to protect investors
  • Timo Lehes says the regulator’s decision to reject VanEck’s ETF application shows crypto market is still not ready

The US Securities and Exchange Commission (SEC) once again rejected an application that sought to have a spot Bitcoin exchange-traded fund (ETF).

The disapproval, announced on Friday, shows that the market is “not ready,” according to Timo Lehes, the co-founder of BaFin regulated Swarm Markets.

VanEck’s spot BTC fund would have been physically-settled and seen investors directly track Bitcoin’s price. The SEC ruled the ETF proposal did not meet all the requirements, pointing to issues around the potential for “fraudulent and manipulative acts and practices.” 

In essence, the regulator appears unwilling to expose consumers to the market because it is still uncomfortable with how it can be gamed by powerful players,” Lehes said in a statement shared with CoinJournal.

Despite the drawback, Lehes believes the SEC is well within its mandate as it looks to fulfill its “primary function” of protecting investors.

SEC thinks the crypto market is not ready

Last month, the SEC approved the first Bitcoin futures-based ETFs in the US, an eventuality that saw the market cheer send Bitcoin prices to new all-time highs in early November.

Approval for a crypto spot ETF would take the space to the next level. But does the US securities watchdog think the market is ripe for that leap?

According to Lehes, that’s a ‘no’.

The combination of crypto assets and spot ETFs brings together two of the biggest innovations in finance in the past 30 years. But it is clear that the regulator thinks the market is not ready for it,” he noted. 

This outlook, he explains, can only change if the crypto industry sought to work with the regulator. The SEC will continue to carry out its job of ensuring investor protection and thus placing the onus of being ready for a spot ETF squarely on the crypto industry.

SEC chair Gary Gensler has made it abundantly obvious that he favours futures-based contracts over spot price ETFs when it comes to bitcoin and crypto more widely. Working within the framework it lays out, and listening to the concerns of the likes of Gensler, is ultimately the most likely route to a successful and sustainable marketplace,” he concluded.

The market will continue to wait for a BTC ETF in the US market and investors looking for exposure can do so via any of the recently approved ProShares Bitcoin Strategy ETF (BITO) and Valkyrie Bitcoin Strategy ETF (BTF).