SEC rejected the Bitcoin ETF proposed by Bitwise Asset Management and NYSE Arca. But Bitwise welcomed the detailed feedback and additional clarity.

Though the SEC rejected the Bitwise ETF, the negative thrust of its 112-page order centered around NYSE Arca’s proposed rule change to enable the listing of the Bitwise Bitcoin ETF.

The SEC said it disapproved the proposed rule change because NYSE Arca had not met with certain Exchange Act requirements.

In particular, it had not met with “the requirement that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices.”

SEC rejected the Bitwise ETF: Fund’s response

“We deeply appreciate the SEC’s careful review,” said Matt Hougan, Global Head of Research, Bitwise Asset Management in a statement.

He said the detailed feedback in the Order provided critical context and a clear pathway for future ETF applicants.

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SEC’s caveat

The SEC was careful to put its disapproval in context. It said it did not evaluate whether Bitcoin (or blockchain technology, in general) was useful as an innovation or investment.

Instead, SEC rejected the Bitwise ETF because NYSE Arca did not propose adequate rules to check frauds and manipulation in its capacity as an exchange.

Bitwise filed its S-1 on January 9, 2019.

Bitwise’s arguments

In support of its application, Bitwise had multiple meetings with the SEC and submitted over 561 pages of research. It also obtained Comment Letters from prominent people of the crypto and wealth management industries.

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Bitwise also underlined the tremendous changes in the bitcoin market over the past couple of years during the SEC’s examination of various listing proposals.

None of this cut much ice with the SEC, and BitWise is back to square one. However, it put on a brave face. “With additional research and continued progress in the broader ecosystem, the remaining concerns and challenges raised in this order will ultimately be satisfied,” it said.