Sad but not surprised to see the Bitcoin ETF rejected by the SEC. It's time for the crypto community to take both SEC's concerns and its own long-standing problems seriously.
Winklevoss twins bitcoin ETF rejected by SEC
Conversation
1. The SEC cites the disparate prices across exchanges as one of the big problems standing in the way of an ETF. IC3 is working on solutions to bridge this gap and enable exchanges to improve their liquidity.
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2. The SEC is also concerned about the ease of manipulation. Exchanges can easily engage in wash trading, front running, stop loss/margin call hunting, and a range of other behaviors because they are in a position of trust.
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Worse, current crop of decentralized exchanges actually exacerbate some of these problems. Ongoing research at IC3 focuses on how to build (both centralized and decentralized) exchanges that are better even than what Wall St has now. It's possible to do better than fiat.
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3. Existing cryptocurrencies aren't all that decentralized. There are manipulation groups, miner mfgs with near-monopolistic grips, coders who can change the economics because coins are based on a single code base, etc.
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4. We are just one phishing email or one exit scammer away from Mt. Gox #2. Default state of exchanges is to get hacked. This needs to improve.
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The SEC proved that they are not the often caricaturized "clueless regulators." They understand the problems deeply and will not budge until we materially address these issues.
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They did not buy the "Bitcoin is uniquely resistant to manipulation" argument. Kudos to them. There is no technical reason why the Bitcoin price is less manipulable than any other asset. That was a hollow argument. These regulators are sophisticated, and will not be hoodwinked.
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Replying to
They just said that they presumed the market to be manipulated and there wasn't enough evidence provided in the application to prove to them that their default assumptions are incorrect. It's hard to prove a negative but there are reasons why markets differ in vulnerability.