The final application for an exchange-traded fund tied to Bitcoin (Bitwise’s Bitcoin ETF) has been denied by the Securities and Exchange Commission (SEC), according to a document on the agency's website. Bitwise has tried to mollify the agency's concerns by pointing out the marketplaces in crypto with legitimate volumes, but the SEC said the firm doesn't explain how legitimate exchanges are isolated from those that fake their volumes. Specifically, "because, among other things, the Sponsor has asserted that 95% of the bitcoin spot market consists of fake and non-economic activity, but has not established that it has, in fact, identified the “real” bitcoin market, or that the “real” bitcoin market is isolated from the fraudulent and manipulative activity, we find, in each case, that NYSE Arca has not met its burden to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and therefore the Commission disapproves this proposed rule change" the agency wrote in its more than 100-page rejection letter.
Nevertheless, given the low market expectations surrounding the event, the market was largely unfazed by this. Instead, the sentiment remained supported by the positive developments coming out of the DevCon 5 conference in Osaka, Japan. Ethereum gradually advanced past $190 level, while Bitcoin is now trading in mid-$8.5k area.
In terms of news flow, according to a Bloomberg article published on Oct. 9, a letter to Visa, Mastercard and Stripe was sent by two U.S. senators. In it, they are reportedly pressuring the three payment giants to look closer at the regulatory implications of Libra. The report comes a week after the rumors started to spread about the companies’ cold feet over Facebook’s digital currency. PayPal, formerly a member of the Libra Association, then officially left — saying that it fears the kind of repercussions the letter appears to embody.
Elsewhere, CoinDesk writes that the US Internal Revenue Service (IRS) has published its first guidance in five years for calculating taxes owed on cryptocurrency holdings. Industry members have been eagerly awaiting the update since May 2019, when IRS Commissioner Charles Rettig said the agency was working on providing fresh guidance. The agency’s 2014 guidance left many questions unanswered, and the crypto market has grown more complex in the years since. As expected, the guidance notice released Wednesday addresses: the tax liabilities created by cryptocurrency forks; the acceptable methods for valuing cryptocurrency received as income; and how to calculate taxable gains when selling cryptocurrencies.
Thank you for reading,
The BeQuant’s Analytics team