Just when it looked like bitcoin ETFs were going to be stopped before they ever got started, a glimmer of hope appeared. It was a small, faint glimmer, but it appeared nonetheless.

The US Securities Exchange Commission decided on Wednesday to reject nine bitcoin-based exchange-traded fund applications, but, on Thursday, SEC Commissioner Hester M. Peirce officially offered up dissent to the agency’s ruling.

Her reasoning? It’s complicated, but the gist is, the SEC staff made their decision on the fact that the bitcoin market is not only an unregulated one, but that the bitcoin futures market — which is regulated — is still dangerously small. Neither, however, are in and of themselves necessarily good reasons to actually bar the creation of bitcoin ETFs. Ergo, Peirce and her peers will be reviewing the agency’s ruling on the matter, potentially clearing the path for cryptocurrency exchange-traded funds.

“Potentially” is the operative word. And even if the agency’s leadership overrules its initial decision, the creation of an actual bitcoin ETF is still many months down the road.

They Said/She Said

The SEC had been holding off on making a ruling on nine separate bitcoin ETF products and, understandably, posted public responses to all nine applications in one fell swoop on Wednesday. There was a common thread to all the rejection notices, though. That is, the committee said that bitcoin ETFs were not compliant with the requirements that “prevent fraudulent and manipulative acts and practices.”

The language cuts straight to the heart of the debate that’s raged since the dawn of cryptocurrencies — the whole point of them is decentralization, which, by default, sidesteps any meaningful regulation of them.

The matter isn’t quite so black and white, though.

When ETFs were invented back in the early 90’s, it wasn’t envisioned that anything other than regulated securities would serve as their constituents. And it was presumed that the marketplace would only be interested in ETFs of securities of significant interest, meaning the illiquidity of those constituents wouldn’t be a problem.

Neither of those norms applies now, though, leaving the SEC in an unfamiliar spot. That is, does its role of protecting investors include protecting them from conceptually-risky ideas even if the instrument — the ETF in this case — is legitimate?

For some of the ETF applications in question, the lines are further blurred by the fact that the exchange-traded fund would be built on bitcoin futures, which are regulated, rather than directly on bitcoin. Liquidity and size is still a concern, but, structurally, that ETF wouldn’t look terribly different than any other.

The unusual nature of potential bitcoin ETFs was enough for Commissioner Peirce to tweet regarding Wednesday’s rejections: “The Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff’s action, as will now happen here.”

More insight into Peirce’s line of thinking  was available in her official dissent explanation posted on Thursday. In it she explains (among other things):

“The Commission’s mission historically has been, and should continue to be, to ensure that investors have the information they need to make intelligent investment decisions and that the rules of the exchange are designed to provide transparency and prevent manipulation as market participants interact with each other. The Commission steps beyond this limited role when it focuses instead on the quality and characteristics of the markets underlying a product that an exchange seeks to list.”

Peirce still seems to be in the minority, but her point is well taken. Her message also subtly gives would-be purveyors of bitcoin ETFs some direction in how they may want to plead their cases in the future.

Neither Peirce nor the SEC, however, offered any sort of time frame about the impending review process.

Bottom Line on Bitcoin ETFs

Will bitcoin ETFs, or exchange-traded funds for other cryptocurrencies, ever become a reality? Probably. There’s simply too much interest from fund companies as well as crypto proponents, both groups of which will certainly leverage the curiosity-driven interest in these instruments. There’s no limit to the number of times a fund company can submit an application for a new ETF — and even the rejections of those requests are each a learning experience.

In the meantime, the crypto-trading markets continue to gain the size and credibility they need to facilitate a healthy ETF.

Speculators waiting on bitcoin ETFs to get into the game via more conventional trading vehicles, however, may not want to hold their breath. Brian Kelly, founder of digital currencies investment firm BKCM recently commented, “I think the likelihood [of approval] in 2018 is low. In fact, I’d be shocked if it was approved this year.”

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.