On March 11th, 2017, the Securities and Exchange Commission rejected an application to create an exchange-traded fund tied to the price of Bitcoin. An exchange-traded fund trades like a stock and tracks an index of assets. After the announcement, Bitcoin prices fell more than 15 percent.
SEC cited the lack of regulation in the current Bitcoin trading market as its reason for rejecting the Winklevoss Bitcoin Trust. According to the SEC, the lack of regulation raised “concerns about the potential for fraudulent or manipulative acts and practices in this market.” The SEC, however, is willing to reconsider its decision once Bitcoin-related markets become more mature. If the SEC did approve the application, an exchange-traded fund would help mainstream Bitcoin by increasing its availability to retail investors through brokerage firms.
While traditional financial institutions have avoided investing in Bitcoin due to regulatory concerns, these institutions have shown great interest in blockchain, which is the technology behind Bitcoin that created a new system for tracking information. Since the Bitcoin market is still in its infancy, I believe SEC made the correct decision to protect investors from an unregulated market that trades beyond the US and has relations to online black markets.
Reference: https://www.nytimes.com/2017/03/10/business/dealbook/winkelvoss-brothers-bid-to-create-a-bitcoin-etf-is-rejected.html
I find this article very interesting. I believe a bitcoin trading market holds a lot of potential, but is still too new to be traded. I believe only after proper regulations are put in place to protect consumers, may this product be viable.