SEC Rejects Fidelity’s Bitcoin ETF Application

By Eric • January 28, 2022 2:58 pm • Comments

The Securities and Exchange Commission (SEC) of the United States has rejected Fidelity’s Wise Origin Bitcoin Trust, a spot exchange-traded fund (ETF) on Thursday.

The Securities and Exchange Commission of the United States does not appear to be prepared to approve Bitcoin-linked exchange-traded funds anytime soon. Within a week, the Securities and Exchange Commission (SEC) rejected two other spot exchange-traded funds (ETFs) that were based on the flagship cryptocurrency.

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The other two funds, First Trust and SkyBridge Capital received a similar denial by the SEC. Fidelity’s Origin Bitcoin Trust was denied because of its worries about fraud, manipulation, and investor protection, among other things.

According to Coin Telegraph:

The SEC extended its deliberation window to approve or deny the offering in July and November following Fidelity’s original application in March 2021 — but published in the Federal Register on June 1. The SEC added that the BZX exchange “has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section.”

“It is essential for an exchange listing a derivative securities product to enter into a surveillance-sharing agreement with markets trading the underlying assets for the listing exchange to have the ability to obtain information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules,” stated the SEC ruling.

“While we are disappointed by the outcome of the SEC’s deliberations resulting in today’s disapproval order, we reaffirm our belief in market readiness for a physical bitcoin exchange-traded product and look forward to continued constructive dialogue with the SEC,” said Fidelity investments communications director Claire Putzeys.

It was in March of last year when the $4.9 trillion investing giant, Fidelity Investments submitted its application to the SEC. Its goal was to propose a regulation modification that would allow for the listing and trading of shares of the Wise Origin Bitcoin Trust, Which would serve as a new, safer Bitcoin investment method through an ETF. Investing in the fund through a standard brokerage account would have offered investors the chance to access the fund without the possible obstacles to entry or hazards that are associated with dealing directly with Bitcoin.

According to a document filed on Thursday, the SEC has decided to reject the request. Any rule modification in favor of sanctioning the ETF, according to the commission, would not prevent “fraudulent and manipulative acts and practices” nor would it necessarily “protect investors and the public interest.” according to government officials.

While the SEC has not yet approved exchange-traded funds (ETFs) that have direct exposure to bitcoin (BTC), the agency has already allowed the use of other investment vehicles that are connected to bitcoin derivative contracts which started being offered in October 2021.

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