What Do the SEC’s Recent Bitcoin Disapproval Orders Really Mean for Investors?

The Harvard Law School Forum on Corporate Governance and Financial Regulation 2017-04-29

Posted by Wenchi Hu & Vivian A. Maese, Latham & Watkins LLP, on Thursday, April 27, 2017
Editor's Note: Wenchi Hu and Vivian A. Maese are partners at Latham & Watkins LLP. This post is based on a Latham publication by Ms. Hu, Ms. Maese, Stephen P. Wink, Yvette D. Valdez, Douglas K. Yatter, and Federico F. Soddu.

On March 10, 2017, the US Securities and Exchange Commission (SEC) issued an order (the BZX Order) disapproving a rule change that Bats BZX Exchange (BZX) had proposed to list and trade shares issued by the Winklevoss Bitcoin Trust. On March 28, 2017, the SEC issued another order (the NYSE Arca Order, together with the BZX Order, the Orders) disapproving a rule change that NYSE Arca had proposed to list and trade shares of the SolidX Bitcoin Trust. The Orders do not allow securities with bitcoin as the underlying asset to be traded on a national securities exchange because of the SEC’s concern that bitcoin markets are unregulated and susceptible to manipulation. Importantly, the Orders do not impact trading in bitcoin, but only the proposed trading in instruments that would be securities on national securities exchanges with underlying assets in bitcoin. The Orders do not break the SEC’s silence to date on its specific views of bitcoin and other cryptocurrencies as securities, and the Orders do not otherwise affect cryptocurrencies, blockchain and distributed ledger technology, or any of their respective applications.