In a move that probably won’t come as a shock, the Securities and Exchange Commission has once again shot down a proposal to launch a bitcoin exchange-traded fund. 

In a 112-page order, the regulator on Wednesday rejected a proposed rule change submitted by NYSE Arca to list and trade shares of the Bitwise Bitcoin ETF Trust, which is sponsored by Bitwise Asset Management.

The SEC said its beef isn’t with bitcoin or blockchain per se. Instead, the regulator said NYSE Arca hasn’t met its obligation under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5) and, specifically, the requirement that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices.”

Bitwise Asset Management, a cryptocurrency index and research shop, initially filed a registration statement for the Bitwise Bitcoin ETF Trust in January. Bitcoin-related exchange-traded products had by then already hit a wall at the SEC, and Bitwise hoped to change that narrative with a proposed ETF it said differs from previously filed bitcoin ETFs by relying on regulated third-party custodians to hold its physical bitcoin, and that the product's underlying index draws prices from various cryptocurrency exchanges representing the majority of currently verifiable bitcoin trading.

In its filing, Bitwise said the reliance on multiple verified exchanges, coupled with including listed futures that are physically settled, minimize potential negative impacts from any single exchange going offline due to technical difficulties or hacking, and can help protect against outside attempts to manipulate reported volume and/or prices.

Meanwhile, NYSE Arca in January submitted its rule change proposal with the SEC to list and trade the Bitwise Bitcoin ETF Trust.

As part of the effort to gain support for its bitcoin ETF, Bitwise in March released a study showing that 95% of spot bitcoin trading reported by exchanges is fake. In addition, Bitwise said that 10 exchanges accounted for the bulk of the real average daily volume of bitcoin trading, and these exchanges tend to be better capitalized and more closely regulated than others.

But in its rejection of NYSE Arca’s proposal to list the Bitwise Bitcoin ETF Trust, the SEC said while Bitwise asserts that 95% of the spot bitcoin market consists of fake and non-economic activity, it hasn’t “established that the ‘real’ bitcoin market is isolated from that fraudulent and manipulative activity.”

The SEC also said the record doesn’t indicate that arbitrage in the so-called “real” bitcoin spot market is as effective as Bitwise claims.

In short, the SEC believes the bitcoin market has a ways to go to prove that it can be trusted, and that NYSE Arca and Bitwise Asset Management haven’t shown that the Bitwise Bitcoin ETF Trust is resistant to manipulation.

The SEC has rejected every bitcoin ETF proposal ranging from the Winklevoss Bitcoin Trust submitted by the Winklevoss brothers, which was the pioneer in this space, to the VanEck SolidX Bitcoin Trust, where a proposal to list and trade that product on Cboe Global Markets Inc.’s BZX exchange was withdrawn last month.

In a statement following the SEC’s disapproval of NYSE Arca's proposed rule change to list the Bitwise Bitcoin ETF, Bitwise Asset Management said it believed that “with continued progress in the broader ecosystem, the remaining concerns and challenges raised in this order will ultimately be satisfied.”