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Securities Exchange Commission Has Rejected Two Proposals For Bitcoin ETFs

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Regulators have turned down two proposals to offer physically-backed Bitcoin exchange-traded funds, delivering a bag of coal to crypto fans just in time for the holidays.

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The Securities and Exchange Commission said on Wednesday that Valkyrie Investments and Kryptoin’s proposals failed to meet the SEC’s standards for preventing fraudulent and manipulative conduct. In October, it permitted futures-backed Bitcoin ETFs to be issued. The SEC’s earlier-than-expected decision could mean that a pure Bitcoin fund approval in 2022 isn’t in the cards either.

According to Eric Balchunas, a Bloomberg Intelligence analyst, the deadline for a decision on the two fund proposals was Jan. 7, which he likens to a “Scrooge-jection.”

The decision comes less than a month after the SEC denied VanEck’s request for a spot Bitcoin ETF.

“We were bullish about futures, but we’re not confident in a 2022 approval,” Balchunas said, citing the reason that the SEC is disapproving faster than it needs to.

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For investment fund providers, launching the first spot-Bitcoin ETF remains the holy grail, as such products are seen as an entry point into crypto for millions of individual investors. ProShares Bitcoin Strategy, the first Bitcoin futures ETF, attracted $1 billion in investor inflows shortly after its debut.

The SEC is scheduled to make a ruling on First Trust/proposed Skybridge’s spot-Bitcoin ETF on January 22, followed by Fidelity’s on January 27. According to Bloomberg Intelligence analyst James Seyffart, who joked in a meme picturing the SEC as the Grim Reaper knocking on First Trust and Skybridge’s door, the chances of those getting approved are slim.

According to Bloomberg Intelligence statistics, the number of crypto-tracking investment vehicles has more than doubled to 80 from just 35 at the end of 2020. Assets increased to $63 billion from $24 billion at the beginning of the year.