On August 22, 2018, the Securities and Exchange Commission issued an “Order Disapproving a Proposed Rule Change to List and Trade the Shares of the GraniteShares Bitcoin ETF and the GraniteShares Short Bitcoin ETF.”
The SEC order rejected a request for a proposed rule change, observing that the party making the request "has not met its burden 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), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.13"
The order considered known issues such as price discovery, high frequency trading, and market manipulation generally, and went on to conclude that the party making the request had “not demonstrated that it has entered into a surveillance-sharing agreement with a regulated market of significant size related to bitcoin, or that, given the current absence of such an agreement, the exchange’s own surveillance procedures described above would, by themselves, be sufficient to satisfy the requirement of Exchange Act Section 6(b)(5) that an exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.96”
Would the issuer (or other relevant party making such a request) of shares of an ETP holding cryptocoins as an asset have to demonstrate that it could successfully deter and/or mitigate a 51% attack to be within compliance with Exchange Act Section 6(b)(5)?
At the time the order was issued, a 51% attack was, as far as is publicly known, still only a theoretical (pls see: https://www.investopedia.com/terms/1/51-attack.asp ) form of cryptocurrency hack. As of this writing however, in the early days of 2019, there have been at least some published reports of a successful 51% attack on a blockchain based platform.
