Another BTC ETF denied by US securities regulator over ‘manipulation’ concerns

As recently reported by CoinGeek last November 19, the VanEck Futures ETF was approved, but a spot ETF was unlikely. And now we’re seeing more pieces of evidence that the lack of transparency and well-known manipulation in the BTC market by Tether and other crypto industry insiders is standing in the way of a BTC spot ETF.

In yet another denial, the U.S. Securities and Exchange Commission (SEC) rejected Cboe BZX’s application for a rule change that would allow a BTC spot ETF to be approved. In listing its reasons, the regulator mentioned the words manipulation and manipulative 142 times.

More about the SEC’s latest BTC ETF rejection

From reading the rejection notice issued on December 1, we can learn that:

  • On March 26, 2021, Cboe BZX Exchnage Inc. filed a proposed rule change with the SEC. It requested that shares of Wisdom Tree Bitcoin Trust be listed and traded.
  • After consideration, the SEC rejected the proposal. It cited that BZX does not sufficiently contest the presence of fraud and manipulation in the BTC spot market.

Listing some of the fraudulent activities that it has previously raised concerns about, the SEC specifically mentioned:

  • Wash trading
  • Persons with a dominant position (aka whales) manipulating prices
  • Hacking of trading platforms and the BTC network
  • Malicious control of the BTC network
  • Trading based on insider information, including false information
  • Manipulative activity related to the ‘purported stablecoin’ Tether
  • Fraud and manipulation within trading platforms themselves

The regulator then went on to cite security concerns related to the BTC blockchain itself and various trading platforms. More generally, it expressed dissatisfaction at the unregulated nature of the BTC markets and how easily they can be manipulated.

The anti-law narrative is coming back to haunt BTC

Years ago, Dr. Craig Wright told Bitcoiners that attempting to pitch Bitcoin as some sort of anti-law, anti-government system would not work out well in the long run.

We see clear evidence of this here. The Bitcoin-anarchist and extreme libertarian elements of the BTC community have resisted calls for meaningful regulation and surveillance while at the same time pitching BTC as digital gold or an investment asset.

Unfortunately, these incompatible narratives have gotten BTC advocates into quite a bind. While they have sold BTC as digital gold to enrich themselves, other factions have continued to promote it as a system outside of the reach of the law. As evidenced by the repeated rejections of BTC spot ETF applications, one of these narratives is going to have to go.

BTC faces a choice: either it is an underground railroad that operates outside of the law, in which case it will never see the fresh injection of institutional capital its holders so desperately crave, or it’s a new asset class that submits to government oversight, regulation, and surveillance, and the crypto-anarchist narrative dies.

For now, we can expect that spot ETF applications will continue to be rejected. As long as Tether refuses to come out of the shadows and BTC influencers like Cobra and Erik Voorhees continue to resist what they see as government interference in the BTC markets, the fabled BTC spot ETF will never materialize.

Watch: U.S. Congressman Bill Foster on Bitcoin Association’s Blockchain Policy Matters

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