Regulators responded to a narrow question about trading bitcoin-based securities, with orders that should not limit innovation in bitcoin technologies.

On March 10, 2017, the US Securities and Exchange Commission (SEC) issued an order (the BZX Order) disapproving a rule change that Bats BZX Exchange (BZX) had proposed to list and trade shares issued by the Winklevoss Bitcoin Trust.1 On March 28, 2017, the SEC issued another order (the NYSE Arca Order, together with the BZX Order, the Orders) disapproving a rule change that NYSE Arca had proposed to list and trade shares of the SolidX Bitcoin Trust.2 The Orders do not allow securities with bitcoin as the underlying asset to be traded on a national securities exchange because of the SEC’s concern that bitcoin markets are unregulated and susceptible to manipulation. Importantly, the Orders do not impact trading in bitcoin, but only the proposed trading in instruments that would be securities on national securities exchanges with underlying assets in bitcoin. The Orders do not break the SEC’s silence to date on its specific views of bitcoin and other cryptocurrencies as securities, and the Orders do not otherwise affect cryptocurrencies, blockchain and distributed ledger technology, or any of their respective applications.