×
Pro Analysis

Breakingviews: Bitcoin is maimed, long live the blockchain

Bitcoins
Getty Images

Long live bitcoin. U.S. regulators resoundingly rejected a plan submitted by the Winklevoss twins of Facebook fame to list an exchange-traded fund linked to the digital currency. At the same time, the ledger technology behind it is gaining traction on Wall Street.

The Securities and Exchange Commission's decision was sweeping, going beyond mere technicalities to focus on the fundamentals of the proposed Winklevoss Bitcoin Trust. Much of today's trading takes place in unregulated Chinese markets that are widely suspected of allowing front running, wash trades and other dodgy practices, the agency noted. That makes it impossible to have surveillance-sharing arrangements to prevent fraudulent practices and safeguard investors.

Two other digital-investment firms have similar ETF ideas pending with the SEC, but it's hard to see how they can address such concerns any time soon. Jay Clayton, Donald Trump's nominee to run the agency, is unlikely to bring a change of view. Applicants thought they stood a good chance with the acting chair, Michael Piwowar, an advocate of new ideas and lighter regulation. In a recent speech, he even argued that many rules actually prevent investors from diversifying their holdings with high-risk, high-return securities.