As bitcoin continues its attempt to move toward legitimacy and stability, the cryptocurrency was handed a significant defeat Friday when the Securities and Exchange Commission denied the application for a bitcoin-centric exchange traded fund.
The Winklevoss Bitcoin Trust ETF, backed by twin entrepreneurs Cameron and Tyler Winklevoss (yes, the Facebook twins), was rejected by the commission after it found the proposed fund was susceptible to fraud due to the digital currency’s unregulated nature.
In response to the decision, the bitcoin price of bitcoin plunged, dropping 18 percent in trading. The currency opened the day valued at $1,191.82 and peaked at $1,325.81 but dropped as low as $1,022.68 before recovering slightly and closing the day at $1,101.54.
The concept behind the ETF was to create a stock fund tied to the price of bitcoin, which would allow investors to purchase the currency without holding it directly. The fund would work in the same way that a person can investment money into another commodity like gold.
This would have helped lower the barrier of entry that comes with the cryptocurrency, which requires people to create a unique bitcoin wallet and the ability to “mine” for bitcoin by lending their computing power to blockchain transactions.
Investors in a bitcoin ETF wouldn’t be able to make purchases using bitcoin but would be able to buy and sell it at its listed value, which would benefit the bitcoin economy by creating more liquidity in the market.
The rejection issued by the SEC, which must approve ETFs before they are made available to the public, marks a significant stepback for the currency as it attempts to move more toward legitimacy.
Read: Lawmakers Create Caucus To Promote Technology Behind Bitcoin
Bitcoin interest is as high as it has ever been, with the cryptocurrency surpassing the price of an ounce of gold for the first time in its history earlier this month. The currency has generally been trending upward since the start of 2017, and an approval of a bitcoin ETF would have marked the currency’s arrival for small traders and institutions.
The Winklevoss Bitcoin Trust ETF was one of three groups seeking regulatory approval for a bitcoin fund, and was generally considered the most likely to be approved—though experts still called that likelihood “a coin-toss” prior to its rejection.
The technology behind bitcoin transactions—blockchain—has also generated more attention in recent months. Earlier this year, Democratic congressmen Jared Polis of Colorado and Arizona Republican David Schweikert launched the bipartisan Blockchain Caucus to help create sound public policy for blockchain technologies and digital currencies.