U.S. regulators reject Bitcoin ETF, digital currency plunges
The U.S. Securities and Exchange Commission on Friday denied a request to list what would have been the first U.S. exchange-traded fund built to track bitcoin, the digital currency.
Investors Cameron and Tyler Winklevoss have been trying for more than three years to convince the SEC to let it bring the Bitcoin ETF to market. CBOE Holdings Inc's (CBOE.O) Bats exchange had applied to list the ETF.
The digital currency's price plunged, losing some 18 percent in trading immediately after the decision.
Bitcoin had scaled to a record of nearly $1,300 this month, higher than the price of an ounce of gold, as investors speculated that an ETF holding the digital currency could woo more people into buying the asset.
Bitcoin is a virtual currency that can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government.
Yet bitcoin presents a new set of risks to investors given its limited adoption, a number of massive cybersecurity breaches affecting bitcoin owners and the lack of consistent treatment of the assets by governments.
"Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated," the SEC said in a statement posted online. "The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop."
The regulators have questions and concerns about how the funds would work and whether they could be priced and trade effectively, according to a financial industry source familiar with the SEC's thinking.
"We remain optimistic and committed to bringing COIN to market, and look forward to continuing to work with the SEC staff," said Tyler Winklevoss, CFO of Digital Asset Services LLC.
"We began this journey almost four years ago, and are determined to see it through. We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors."