On Wednesday (January 23th), the U.S. Securities and Exchange Commission (“Commission”) announced that Cboe BZX Exchange (“BZX”), which was going to be the exchange that would list the VanEck-SolidX Bitcoin ETF if it got approved, had withdrawn the proposed rule change.
The SEC’s notice said that BZX had withdrawn the “Proposed Rule Change to List and Trade Shares of SolidX Bitcoin Shares Issued by the VanEck SolidX Bitcoin Trust“, and that this proposal (SR-CboeBZX-2018- 040) had been withdrawn on Tuesday (January 22nd).
BZX had filed with the Commission this proposed rule change on 20 June 2018; this proposal “was published for comment in the Federal Register on July 2, 2018.” Since then, VanEck, SolidX, and BZX had been waiting for the Commission to hopefully approve the proposed rule change, but the Commission kept asking for more time to make its decision, and the final deadline was going to be February 27th.
On January 18th, American lawyer Jake Chervinsky, who is highly-respected in the crypto community for his excellent commentaries on how U.S. securities laws affect companies that deal with cryptoassets, decided to focus his attention on the VanEck-SolidX Bitcoin ETF proposal and how its approval/denial may (or may not) be affected by the current U.S. government shutdown (which began on 22 December 2018).
The reason that Chervisnky took to Twitter to comment on this particular Bitcoin ETF proposal and how it might be affected by the current government shutdown is that he had noticed on Twitter “a lot of confusion & misinformation about how the shutdown affects the SEC and its process for handling ETF proposals.”
The conclusion of his tweetstorm was: “All I’m saying is that the shutdown doesn’t improve the ETF’s chances of approval at all. In fact, the opposite is probably true.”
Shortly after the SEC’s announcement came out, Chervinsky issued the following tweet:
CBOE has withdrawn the VanEck/SolidX bitcoin ETF proposal (https://t.co/812Ym7U7Hh).
They haven't given a reason yet, but withdrawal implies that they expected denial & didn't want another SEC order setting bad precedent for the future.
There will be no bitcoin ETF in Q1 2019.
— Jake Chervinsky (@jchervinsky) January 23, 2019
Chervinsky’s reasoning makes sense. Given what the SEC Chairman Jay Clayton said back in November 2018 about his concerns over market manipulation on exchanges dealing with Bitcoin, even without the current U.S. government shutdown, it would have been unlikely for the Commission to have given this or any other Bitcoin ETF proposal its blessing anytime soon since most Bitcoin trading takes place on exchanges outside the U.S. and therefore hard for the SEC to monitor/control. And so, it makes sense for BZX to withdraw the application now and save face rather than have the proposal be eventually disapproved by the Commission.
And a few minutes ago, Gabor Gurbacs, the digital asset strategist/director at VanEck/MVIS sent out the following tweet:
The Bitcoin ETF filing has been temporarily withdrawn. We are actively working with regulators and major market participants to build appropriate market structure frameworks for a Bitcoin ETF and digital assets in general. Will keep you updated. pic.twitter.com/o9yiN47ZKe
— Gabor Gurbacs (@gaborgurbacs) January 23, 2019
At press time (around 20:30 UTC on January 23rd), according to CryptoCompare, Bitcoin is trading at $3,555, down 0.93% in the past 24-hour period. The fact that the market has not overreacted to the SEC’s announcement seems to suggest that a disapproval order from the Commission was already priced in, and since the withdrawal of the proposed rule change is not any worse than an outright rejection, it makes sense that the market is disappointed but not shocked by what has happened today.
Update on January 24th at 05:00 UTC:
In an interview on January 23rd with CNBC’s Bob Pisani, VanEck’s founder and CEO Jan van Eck explained why their Bitcoin ETF proposal had been withdrawn:
“Techncially, the SEC is affected by the shutdown. So, we were engaged in discussion with the SEC about the Bitcoin-related issues—custody, market manipulation, prices—and that had to stop, and so instead of trying to slip through or something, we just had the application pulled, and we will re-file and re-engage in the discussions when the SEC gets going again.”
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