In a scathing critique, Cameron Winklevoss, the co-founder of Gemini exchange, has accused the U.S. Securities and Exchange Commission (SEC) of driving investors towards “toxic” and unregulated cryptocurrency products due to its continuous refusal to approve spot Bitcoin exchange-traded funds (ETFs). Winklevoss highlighted that it has been a decade since he and his brother Tyler first filed for their own ETF approval, emphasizing that the SEC’s failure to act has been detrimental to American investors and exposed regulatory shortcomings.
Without an approved spot Bitcoin ETF, Winklevoss argued that U.S. investors have resorted to investing in products like the Grayscale Bitcoin Trust (GBTC), which currently trades at a significant discount to Bitcoin’s price and imposes exorbitant fees. According to YCharts, GBTC’s net asset value (NAV) discount stands at 30% compared to the actual Bitcoin price. Additionally, the GBTC annual fee is 2%, much higher than the industry average of 0.40% reported by MorningStar in July 2022.
Winklevoss further contended that the SEC’s refusal has led investors to seek alternatives on offshore platforms that operate without licenses or regulations. He specifically singled out FTX as “one of the largest financial frauds in modern history.” In light of this situation, Winklevoss urged the SEC to reflect on its ineffective track record and refocus its efforts on fulfilling its mandate of investor protection instead of overstepping its boundaries.
These remarks from Winklevoss coincide with a surge in recent filings, renewals, and amendments for spot Bitcoin ETFs by various companies, including BlackRock, Fidelity, WisdomTree, Invesco, Valkryie, and ARK Invest. However, the SEC has reportedly deemed some of these filings inadequate and lacking clarity. The regulator has requested fund managers to resubmit their applications after addressing the deficiencies in their documentation.
Meanwhile, Gemini finds itself entangled in legal disputes with Genesis, a subsidiary of Digital Currency Group (DCG), which also owns Grayscale. Moreover, the exchange is facing charges from the SEC, further highlighting the challenging regulatory environment surrounding cryptocurrencies.
As the crypto industry continues to evolve, the rejection of Bitcoin ETFs by the SEC has created a situation where investors are drawn towards riskier products. The absence of a properly regulated spot Bitcoin ETF limits the accessibility and potential benefits for U.S. investors, while exposing them to higher costs and unregulated platforms.