SEC rejects fund trading in bitcoin

Bitcoin’s price plummeted after regulators rejected a proposal by the Winklevoss twins for a publicly traded fund based on the digital currency, dashing hopes that a government-approved investment vehicle would lead to wider interest in virtual money.

The Securities and Exchange Commission refused to grant an exemption that would have let the Winklevoss Bitcoin Trust trade on the Bats BZX Exchange, according to a filing posted Friday on the SEC’s website. The decision ended a monthslong rally that had pushed the virtual money’s value higher than gold at nearly $1,300. Bitcoin fell as much as 18 percent against the dollar to $978.76 after the decision, the lowest intraday price in a month. It later rebounded to above $1,100.

Friday’s decision doesn’t close the door on a possible ETF based on bitcoin, but it makes the path more complicated. The SEC rejected the application because the Bats exchange would be unable to enter into necessary surveillance sharing agreements because so many bitcoin markets are unregulated, the filing said.

The ruling is a significant setback for Tyler and Cameron Winklevoss, the twin brothers famed for their dispute with Mark Zuckerberg over the origins of Facebook. They had been working with regulators and altering their proposal for years, and said they would not abandon the effort.

“We remain optimistic ... and look forward to continuing to work with the SEC staff,” Tyler Winklevoss said in a statement. “We ... are determined to see it through. We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors.”

Hannah Randall, a spokeswoman for Bats, said the exchange is reviewing the ruling and declined to comment further.

The decision by the SEC was made by the Trading and Markets Division staff, according to the filing. Agency staff has the authority to effectively approve new ETFs without a vote by commissioners.