As the news of the Winklevoss exchange traded fund not being approved by the Securities and Exchange Commission sinks, the CEO of CryptoCompare, which brings the latest streaming pricing data of cryptocurrencies, hints at what could have been responsible for the rejection.

Charles Hayter states in an email that the SEC does not like Bitcoin being unchained from all regulation and the rejection move is, in essence, a form of consumer protection.

He says:

“Whether other jurisdictions will allow a Bitcoin ETF remains to be seen - but for the time being all is not well - and it seems as if the other ETFs in the pipeline for the SEC are facing the same stone wall. The markets are digesting the information at the moment - we expect continued volatility and high volume. The hopes that Bitcoin would move towards mainstream finance have been dashed.”

Competition dashed

An approved ETF would have created a jurisdictional competition as other nations may look to create competing products. It could have eased the process of buying Bitcoin and offer benefits to portfolio managers through its low correlations with traditional assets and open up approvals for other Bitcoin ETF vehicles and for other digital currencies such as Ethereum.

Bitcoin price

Yet it was refused. The market has since seen some panic in the short term and dislocation amongst various fiat pairs. However, as this calms and the fear subsides, the market will likely rally as other hopes step up to the plate, with Bitcoin price continuous growth.

What regulators are thinking

Some of the issues that Hayter thinks could have boggled the minds of regulators about the approval of the ETF include the fear of a fork in the code such as the one that occurred with Ethereum last year.

“There has been no precedent in finance for a similar occurrence but this has largely been mitigated by a good faith option whereby.the Custodian will choose the chain with the largest majority or in good faith the one expected to be so,” Hayter says. “This risk is particularly apparent with the scaling debate coming to the fore again with opposing sides taking up positions.”

Other considered issues are a conflict of interests regarding the roles and the involvement of the Winklevoss as the sponsor of the ETF, as well as the provider of the reference price through their 4 p.m. EST time auction and the custodians of the underlying asset. The Chinese market reported the influence of over 98 percent of Bitcoin trading, the resilience of the Bitcoin network security against various attack vectors, volatility, and the innovation ETFs are supposed to bring to the market causing regulators to seek ways to create a balance between approving and the risks of not approving them.