In just a few minutes after the announcement on Friday, the price of a single Bitcoin tumbled more than 15 percent, to around $1,060.
The decision is a significant setback for Tyler and Cameron Winklevoss, who began working on the Bitcoin exchange traded fund four years ago. An exchange-traded fund tracks an index or a basket of assets but trades like a stock.
The commission said it was rejecting the Winklevoss Bitcoin Trust because the markets where Bitcoin are currently traded are largely unregulated.
The lack of such regulation, the commission said, raises “concerns about the potential for fraudulent or manipulative acts and practices in this market.”
The price of Bitcoin has been climbing sharply in recent weeks, in anticipation that the commission would approve the fund, with the price of a single Bitcoin surging to a record high above $1,300.
Bitcoin aficionados had hoped that an exchange-traded fund would help bring the virtual currency into the mainstream by making it available to retail investors from brokerage firm accounts like Charles Schwab or eTrade.
A handful of other companies have made their own applications to operate Bitcoin E.T.F.s, and the Securities and Exchange Commission could come to a different decision on those funds. But the agency’s broad concern about the unregulated nature of the Bitcoin markets suggests that an approval may be unlikely in the near future.
“It seems as if the other E.T.F.’s in the pipeline for the S.E.C. are facing the same stone wall,” Charles Hayter, the founder of the virtual currency data provider CryptoCompare, said on Friday.
Tyler Winklevoss said that he and his brother were not giving up on the exchange traded fund.
“We began this journey almost four years ago, and are determined to see it through,” he said. “We agree with the S.E.C. that regulation and oversight are important to the health of any marketplace and the safety of all investors.”