Regulators not keen on blockchain and Bitcoin

Regulators not keen on blockchain and Bitcoin

The US Securities and Exchange Commission (SEC) again has denied the listing and trading of Bitcoin, the decentralised digital currency. Meanwhile, the European Central Bank (ECB) has determined that whilst distributed ledger technology (DLT)/blockchain, has its advantages, it is not an option for the Eurosystem’s financial framework.

Banking Technology‘s sister publication Paybefore reports.

SEC has denied the proposal of NYSE Arca exchange, one of the largest electronic communication networks in terms of shares traded, to list and trade the SolidX Bitcoin Trust, which would track Bitcoin’s price and trade like a stock. Earlier, the SEC denied the application of venture capitalists Cameron and Tyler Winklevoss, who wanted to create an exchange-traded fund for Bitcoin.

SEC’s grounds for denying NYSE Arca are similar to those the agency gave for rejecting the Winklevoss twins’ request. The regulator determined that markets for Bitcoin are unregulated and the proposal lacks rules to prevent fraudulent acts and protect investors, among other factors.

“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,” according to SEC’s decision.

Tyler Winklevoss said last month that the brothers were not giving up and they would continue working with the US regulators. On behalf of the Winklevoss twins, Bats BZX Exchange Inc, which would list and trade shares of the Winklevoss Bitcoin Trust, filed a petition for review, claiming the commission’s findings were “clearly erroneous or unsupported by relevant facts or analysis”.

Meanwhile, in Europe, ECB has determined that DLT/blockchain – the technology that underpins Bitcoin transactions – has several advantages, but can’t be considered an option for the Eurosystem’s financial framework, according to a recent report, “Distributed Ledger Technology: Challenges and Opportunities for Financial Market Infrastructures”.

DLT’s advantages include automatically updating records and shortening the settlement cycle, which would lower back-office costs and reduce capital requirements. However, functional, operational, governance and legal aspects need to be weighed before considering the mass adoption of new technologies, according to the report.

“At this stage of its development, DLT is not mature enough and therefore cannot be used in the Eurosystem’s market infrastructure,” the report concludes.