Bitcoin has fallen in price by almost 10 per cent following a decision by the US Securities and Exchange Commission (SEC) to delay a major ruling on the cryptocurrency’s future.
The delayed decision relates to an application for a bitcoin exchange-traded fund (ETF), which if approved could cause the value of bitcoin to skyrocket.
The world’s first ETF backed by gold, which was launched in 2003, is widely credited for pushing gold’s price up by more than 300 per cent in the following decade.
Bitcoin’s price fell from $7,100 to below $6,500 following the delay, prompting even greater drops in value for other major cryptocurrencies like ethereum, ripple and bitcoin cash.
The SEC previously rejected a bitcoin ETF request last year on account of the cryptocurrency’s price volatility. In delaying a ruling on the latest request, made by blockchain platform SolidX through the Chicago Board of Exchange, the SEC said it needed more time to consider the proposal.
A presentation by SolidX to the SEC last week addressed the reasons for the SEC’s 2017 decision not to approve the bitcoin ETF, arguing that there have been “significant changes in product, market structure and overall circumstances” since the ruling.
SEC assistant secretary Eduardo Aleman said in a note published to the agency’s website that the latest decision would be made on whether to approve or disapprove the proposed rule change by 30 September.
“As of August 6, 2018, the Commission has received more than 1,300 comments on the proposed rule change,” Mr Aleman said.
“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change.”
Cryptocurrency analysts claim the ruling centres around the issue of bitcoin custody, whereby a financial institution would actually store bitcoin for the ETF.
“A green light for the bitcoin ETF would fire the starting gun on a race among institutional investors to cash-in on this new product, so the market is rightly frustrated by the delay to the decision,” Matthew Newton, an analyst at the investment platform eToro, told The Independent.
“But there is something bigger at stake. The lingering question mark for the SEC is around bitcoin custody. To approve the decision, they’d need to do so in the knowledge that the ETF was backed by physical bitcoin – either stored by the Chicago Board of Exchange or a third party… Along with regulatory oversight, this question of custody will determine the next big move in the market.”
Goldman Sachs has already begun deliberations over bitcoin custody, making it the first Wall Street banking giant to make such a move.