The US Securities and Exchange Commission has rejected two physically deposited Bitcoin ETFs. Previously, Valkyrie and Kyptoin filed for listing of Bitcoin spot funds traded on the exchange, but none of the products met the standards of the regulator.

Valkyrie and cryptoin ETF rejected

The SEC used similar arguments to reject the investment as it did with other financial instruments with spot digital assets. The Commission believes that exchanges that act as price determiners for assets do not comply with the Commission’s requirements.

Here it is. We have an official rejection letter from the SEC for cryptoins #Bitcoin ETF application. https://t.co/kFjwfFxrKE pic.twitter.com/57pnliRKPa

– James Seyffart (@JSeyff) December 22, 2021

Regulators are demanding centralized and decentralized exchanges to prevent fraudulent manipulation and even volatile price movements, which is inherently impossible due to the decentralized nature of almost every asset in the crypto market.

The commissioners believe that Bitcoin-related exchange-traded products could be significantly affected by manipulation in the spot market, which is contrary to the interests of investors, according to the regulator.

In conclusion, the committee believes that it should not approve physically secured crypto ETPs until exchanges that allow users to trade such assets are regulated or even more centralized.

Are there opportunities for other applicants?

As 2021 comes to an end, the market will unfortunately have to see the first physically secured digital asset product from the USA I know today.

In order to gain SEC approval, a cryptocurrency or digital asset will most likely need to be centralized and regulated by an organization that operates under US law. This contradicts all the principles of cryptocurrencies and decentralization in general.