The wait for bitcoin ETFs seems to be getting longer. The Securities and Exchange Commission (SEC) rejected yet another set of proposals for bitcoin ETFs recently. That batch of proposals joins a heap of applications for bitcoin ETFs rejected by the federal agency since 2014. (See also: Another Issuer Eyes A Bitcoin ETF.)

Despite the agency’s hostile stance, the frequency and number of bitcoin ETF applications has multiplied with the growing popularity of cryptocurrencies as an investment tool. But it still might be too soon to force the agency’s hand regarding bitcoin ETFs. 

A Growing List of Concerns And A Possible Solution   

For the most part, cryptocurrencies have had an unchecked growth trajectory since their introduction. The absence of regulation within the cryptocurrency ecosystem has been a mixed blessing. 

On the one hand, it has resulted in growth and innovation. But it has also eased entry for unsavory characters looking to make a quick buck off unsuspecting investors. The SEC’s letter earlier this year highlighted several such concerns related to security and bitcoin custody at cryptocurrency exchanges. (See also: Why Is The SEC Afraid Of Bitcoin ETFs?)

In its most recent rejection, the agency wrote that the proposals had fallen short of requirements outlined in the Exchange Act indicating “that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.” In particular, the SEC stated that the proposals “failed to demonstrate that bitcoin futures markets are markets of significant size." That failure is critical because it does not prevent fraud in bitcoin markets. It identified “surveillance-sharing” as a necessary practice to satisfy provisions outlined in the Exchange Act. 

For answers to the SEC’s concerns, it might be a good idea to look to Asia. 

Japan and South Korea are countries that account for a lion’s share of trading in cryptocurrencies. Both have systematically plugged gaps in their cryptocurrency ecosystem after a series of costly hacks. For example, the Japanese Financial Services Authority (FSA) cracked down on security practices at cryptocurrency exchanges in the country after the NEM hack. The agency has encouraged crypto exchanges to develop practices and guidelines for self-regulation. Among the practices that have been instituted is the sharing of information among exchanges. (See also: Should Cryptocurrency Exchanges Self-Regulate?)

A similar effort is underway in the United States. The Winklevoss brothers, who filed the first application for a bitcoin ETF, also announced the launch of the Virtual Commodities Association (VCA), an organization to share information and self-regulate crypto exchanges and custody solutions. 

An Uncertain Timeframe

Ryan Radloff, chief executive officer of CoinShares, which has a bitcoin ETF listed in Sweden, estimated that it might take nine months to a year for the SEC to approve a bitcoin ETF. He said approval will not occur until the CFTC concludes its investigation into price manipulation at cryptocurrency exchanges. “It’s tough to put new products on the market, when a regulatory body is investigating behavior in the cash and spot market, and when the SEC has said interbody surveillance is one of their primary concerns,” he said. 

Matt Markiewicz, managing director at Innovation Shares, suggested a timeframe longer than 12 months. According to him, the recent dip and relative stability of crypto markets have helped make the case for a bitcoin ETF stronger. “But, as soon as you see hypervolatility again, you will see headwinds to getting it through,” he said.

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