Many crypto fans are awaiting the day when the first Bitcoin exchange-traded fund (ETF) is approved by the Securities and Exchange Commission (SEC), but the man in charge – Chairman Jay Clayton – needs a little reassurance before he says “yes.”
A Little History
For years, companies have sought to get stamps of approval on their cryptocurrency ETFs, and the SEC has consistently denied their claims. Top-ranking industry officials like the Winklevoss Twins of the Gemini Exchange in New York are not immune to such denials, but one specific application from the VanEck SolidX Bitcoin Trust is widely regarded as the ETF that has the highest chance of garnering approval from the SEC.
This is the third time the company has submitted a Bitcoin ETF application; the first two attempts were met with quick denials, but the third time is different. The SEC has posted the application for public comment and consulted with industry experts regarding the prospects of the ETF, which have been met with positive feedback. The SEC has repeatedly postponed several decision-making dates regarding the application, leading many to believe the organization was being careful and really considering the possibilities.
A Few Serious Concerns
SEC Chairman Jay Clayton’s latest comments, however, could cause a sudden shift into “doubt mode” among crypto enthusiasts. One of Clayton’s biggest concerns regarding the crypto space happens to be market surveillance, and he says it will need to improve before he feels okay giving the green light to a Bitcoin ETF.
He states:
What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation. It’s an issue that needs to be addressed before I would be comfortable… Safeguards do not exist currently in all the exchange venues where digital currencies trade.
Customers Should Be Protected
In addition, Clayton says that custody would need to be improved. One of the big problems meandering through the Bitcoin arena is volatility. Furthermore, investors are repeatedly exposed to the risk of theft, and Clayton says custody options need to be “hardened”:
We’ve seen some thefts around digital assets that make you scratch your head. We care that the assets underlying the ETF have good custody, and that they’re not going to disappear.
Lastly, he comments that many initial coin offerings (ICOs) are still failing to register with the SEC. He says this needs to change immediately, but until it does, investors should always assume that whatever ICO they’re taking part in is a security.
Are Clayton’s concerns valid? Why or why not? Let us know in the comments below.
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