As digital currencies are becoming the talk of the town, Winklevoss twins are not leaving any stone unturned to make digital currencies prevail on an official scale. Despite the disapproval of their bitcoin exchange traded-fund (ETF) by the United States Securities and Exchange Commission (SEC), Winklevoss continue to grow their business.
The brothers who operate the Gemini Trust Co., a digital asset exchange in U.S., are of the view that digital currencies are of great importance when it comes to the modern day business. Despite low acceptance shown by major Wall Street firms, the Winklevoss brothers are confident that the acceptance shown by the retail driven market will change over time and cryptocurrency market will flourish.
The major reasons for institutional investors not entering this market are the insecurity and volatility. The mainly unregulated market is seemingly not a safe place for the institutions to invest in. Winklevoss twins are of the view that once developments are made in the market more and more institutional investors from the Wall Street will join the bandwagon of cryptocurrencies.
Gemini had also partnered up with Cboe Global Market last year in order to launch bitcoin futures contract. The approval of the bitcoin ETF would have opened up gates of investments for the institutional investors and Wall Street spearheads. Although Gemini focuses on services offered in terms of custody for institutional investors, it is now more inclined towards adding cryptocurrencies in its retail business. This is all because of the Winklevoss’s vision regarding the crypto market.
The inclination of Gemini towards digital currencies and technology is also evident from its hiring of its first chief technology officer, Robert Cornish, who was previously the chief information officer of the New York Stock Exchange.
The Winklevoss twins are also interested towards the regulatory aspect of the crypto market. A proposal for a Virtual Commodity Association was also proposed by the brothers back in March in order to provide a self-regulatory framework for the digital currency markets. This is aimed at preventing the digital world from fraudulent activities and promote transparency. The non-profit organization would work with U.S. Commodity Futures Trading Commission in order to achieve this goal.
The proposal for establishing bitcoin ETF was put forward to the SEC by the Gemini operators, but was rejected owing to the fraudulent and manipulative nature of the market. The proposal was also backed by Bats BZX and concerns regarding the digital market also handled in it. But it was disapproved by the SEC owing to the lack of a regulatory framework currently present on the crypto market making it insecure as of now. It was stated by the SEC:
Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin or blockchain technology more generally has utility or value as an innovation or an investment. Rather, the Commission is disapproving this proposed rule change because as discussed in detail below, BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.
Lack of regulations and factors like volatility led to its rejection by the SEC. It stated by the U.S. regulatory body that:
The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop,” the document reads. “Should such markets develop, the Commission could consider whether a bitcoin ETP would based on the facts and circumstances then presented, be consistent with the requirements of the Exchange Act.
As the need for a bitcoin ETF is becoming an urgent need in order to attract the institutional investors in the crypto market, the rejection of establishing a bitcoin ETF was also dissented by one of the commissioner of the SEC itself, Hester M. Peirce. By not providing a platform for the institutional investors, the SEC is not fulfilling its incumbent duties, as suggested by Hester. If the investors know about the market in which they are investing in, they should be provided with the appropriate platforms they need for it. She stated that:
The Commission’s mission historically has been, and should continue to be, to ensure that investors have the information they need to make intelligent investment decisions and that the rules of the exchange are designed to provide transparency and prevent manipulation as market participants interact with each other. The Commission steps beyond this limited role when it focuses instead on the quality and characteristics of the markets underlying a product that an exchange seeks to list.
In a nutshell, despite getting rejected by the SEC on their bitcoin ETF proposal and witnessing low acceptance from major Wall Street investors in the crypto market, the Winklevoss twins remain unshaken regarding their stance towards the crypto market and continue to grow their business.