The crypto exchange founders of Gemini, the Winklevoss Twins were rejected by the Securities and Exchange Commission for the second time on Thursday.
Cameron and Tyler Winklevoss attempted to implement the very first Bitcoin trading and share exchange- traded fund (ETF) which would change the rules of trading shares and alter the SEC’s surveillance.
The SEC’s decision to reject the proposal came down to the regulations stated in the Exchange Act Section 6(b) (5). The SEC’s main considerations were whether the exchange had the ability to “prevent fraudulent and manipulative acts and practices” as well as “to protect investors and the public interest.”
According to the SEC, Bitcoin did not provide safety against manipulation as an asset class and the tools used for blockchain technology could not protect against fraudulent activity or money laundering.
According to cointelegraph, the Gemini founders claimed “crypto markets are uniquely resistant to manipulation.” The SEC felt the information presented to the Commission did not support their claim.
Hours after the Winklevoss twins proposal was rejected, Bitcoin prices dropped 3 percent, dipping below $8000. This dip wasn’t nearly as drastic as the first time their proposal was rejected in March 2017, which caused Bitcoin markets to drop from $1,300 to $900.
The difference between a Bitcoin ETF and a standard mutual fund or stock exchange is an ETF passively tracks trading indexes, mimicking the performance at a lower cost and allowing for the trade to occur throughout the day. A standard mutual fund relies on a professional to conduct the trade and happens at the end of the day when the fund is at its net value price.
Overall, the complexity of the blockchain technology used for Bitcoin’s proposed ETF is difficult to oversee.
While the Gemini founders proposal was not accepted, the SEC did state an openness to additional applications that support its surveillance agreement and said the Bitcoin market is still in the early phases of regulation development.