The United States Securities and Exchange Commission (SEC) announced on Wednesday, October 9, that it has disapproved a proposal filed by Bitwise Asset Management in conjunction with the trading venue NYSE Arca, to create a Bitcoin ETF. The SEC rejected the proposal as it did not meet the legal requirements, to prevent illicit activities or market manipulation.

The decision from SEC comes as a surprise to the crypto community. Earlier, Matt Hougan, the MD and global head at Bitwise, seemed quite optimistic and was quoted saying, “We’re closer than we’ve ever been before to getting a Bitcoin ETF approved.”

However, the SEC did not put the blame solely on Bitwise. Instead, it put the burden on NYSE Arca by saying that NYSE did not comply with the requirements set by the SEC, under section 6 (b) (5) of the Exchange Act, designed to prevent fraudulent and manipulative practices. This echoes the concerns of Jay Clayton, the Chairman of SEC who said, “Bitcoin trades on largely unregulated markets and Bitcoin custodial offerings might not be ready for institutional use.”

Bitcoin has witnessed a fall in its price by as much as 20% of its value in the last three days. However, this failure did not seem to discourage Bitwise and it confirmed that it will keep knocking SEC. The SEC, on the other hand, announced that it will welcome such offerings in the future, even if not immediately.