As SEC Denies Winkelvoss Bitcoin ETF, Commissioner Hester Peirce Publishes Dissent on Commission’s Decision

Commissioner Hester Peirce has slammed the Securities and Exchange Commission’s decision to deny trading of the Winklevoss Bitcoin Trust on Bats BZX Exchange in a public statement.

Peirce stated;

“I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order. More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs [exchange traded products].”

Commissioner Peirce then outlined her justification for her position noting that anti-innovative stance being taken by the regulatory agency;

“…The disapproval order demonstrates a skeptical view of innovation, which may have an adverse effect on investor protection, efficiency, competition, and capital formation well beyond this particular product. The disapproval order’s broad interpretation of the Commission’s statutory mandate signals that the Commission reserves for itself the authority to judge when an innovation is ripe enough, respectable enough, or regulated enough to be worthy of the securities markets. By suggesting that bitcoin, as a novel financial product based on a novel technology that is traded on a non-traditional market, cannot be the basis of an ETP, the Commission signals an aversion to innovation that may convince entrepreneurs that they should take their ingenuity to other sectors of our economy, or to foreign markets, where their talents will be welcomed with more enthusiasm.”

[clickToTweet tweet=”the Commission signals an aversion to innovation that may convince entrepreneurs that they should take their ingenuity to other sectors of our economy, or to foreign markets, where their talents will be welcomed with more enthusiasm, SEC Commissioner Peirce” quote=”the Commission signals an aversion to innovation that may convince entrepreneurs that they should take their ingenuity to other sectors of our economy, or to foreign markets, where their talents will be welcomed with more enthusiasm, SEC Commissioner Peirce”]

Accordingly, I Dissent

Peirce said the Commission is “engaging in merit regulation.” Accepting the fact that Bitcoin may, or may not succeed, she believes it is not the place of the Commission to pick the winners in the digital asset sector.

“The Commission, however, is not well positioned to assess the likelihood of either outcome, for bitcoin or any other asset. Many investors have expressed an interest in gaining exposure to bitcoin, and a subset of these investors would prefer to gain exposure without owning bitcoin directly. An ETP based on bitcoin would offer investors indirect exposure to bitcoin through a product that trades on a regulated securities market and in a manner that eliminates some of the frictions and worries of buying and holding bitcoin directly. If we were to approve the ETP at issue here, investors could choose whether to buy it or avoid it. The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets. Accordingly, I dissent.”

 

Peirce, a newer member of the Commission, has emerged as a staunch advocate of Fintech innovation and the benefits of enabling competition. Clearly willing to understand the global nature of emerging financial services, her voice is a refreshing reminder of how a federal agency should manage change – even if her comments are in disagreement with the majority.

[clickToTweet tweet=”The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from our mission of protecting investors, fostering capital formation, & facilitating fair, orderly, and efficient markets” quote=”The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from our mission of protecting investors, fostering capital formation, & facilitating fair, orderly, and efficient markets”]

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