A Brief History of the SEC's Reviews of Bitcoin ETF Proposals

Back in March 2017, the SEC rejected the application for a Bitcoin ETF put forward by the Winklevoss twins, claiming that the underlying Bitcoin market was still too manipulable, volatile and resistant to surveillance.

Fast forward to March 2019 and the SEC has still yet to approve a single Bitcoin ETF, with the comments to its latest public consultation remaining largely negative.

The intervening period between March 2017 and the present day has witnessed a softening of the SEC's stance, with members of the commission even going so far as declaring that they expect a Bitcoin ETF to be approved sooner or later.

There is plenty of reason to draw hope from the SEC's recent dealings with Bitcoin ETF applicants, even if the longer-term history shows that the commission hasn't always adopted a favorable stance toward crypto.

If approved, the Winklevoss' ETF would have been the first Bitcoin exchange-traded fund licensed to appear on a fully regulated stock exchange, thereby making it possible for the layperson to gain exposure to Bitcoin without having to actually own the cryptocurrency or wrestle with crypto exchanges or wallets.

As the two episodes above imply, 2017 wasn't a particularly great year for Bitcoin ETFs or for the notion that the SEC might be inclined to license one of them - because, aside from SolidX and Winklevoss, an ETF from Barry Silbert's Grayscale Investments was registered with the the SEC in January 2017, and it fared no better than its rivals.

Still, despite the fact that wider industry and public opinion was in general warming to the idea of Bitcoin ETFs, 2018 unsurprisingly set the record for the number of proposals dismissed by the SEC. On Aug. 22 alone, the commission rejected nine applications, with the likes of Direxion, ProShares and GraniteShares having their applications turned down.

In February, Robert J. Jackson Jr. - a commissioner with the SEC - went on record as saying that he expects the commission to license a Bitcoin ETF sooner or later.

Added to Hester Peirce's continued support for the crypto industry, such remarks indicate a climate in which the SEC is becoming incrementally more receptive to the idea of a Bitcoin ETF, despite Peirce's warning in December 2018 that an approval could take longer than some people would hope.

In February, Reality Shares withdrew its own ETF trust after the SEC had encouraged it to do so, largely because the ETF took the unusual step of combining Bitcoin futures, sovereign debt instruments and money market mutual funds into a single derivative.