Cryptocurrency Regulation

SEC Chairman Concerned About Investor Protection Regarding Bitcoin ETF

March 15, 2019
Saad Mohammad


SEC Chairman Concerned About Investor Protection Regarding Bitcoin ETF

The chairman of the United States Securities and Exchanges Commission (SEC) has revealed that his biggest concern regarding the approval of a Bitcoin ETF is investor protection. The protection of investors has been the biggest concern for the commission as it feels that the crypto sector is not adequately regulated to warrant a Bitcoin ETF at the present point in time. Chairman Jay Clayton reiterated this point during a recent interview with FOX Business.

Investor protection remains a significant concern

Cryptocurrency enthusiasts and market participants are hoping that the SEC will soon approve a Bitcoin ETF and allow retail investors to trade the leading cryptocurrency on public markets. However, the commission’s chief stated that specific requirements would have to be met before such approval is granted.

Clayton explained that he is concerned about the presence of potential price manipulation in the crypto sector and is looking to ensure that investor protection is guaranteed before an ETF is approved. He stated this as follows:

“What I’m concerned about at the moment is if it can be reasonably demonstrated that the underlying trading is generally not manipulated, it’s happening on reliable venues with good rules, and that custody is something we can feel comfortable about.”

Clayton pointed out that he is not against the launch of a Bitcoin ETF; instead, he expects the markets to put in place specific rules for the ETF. Even though he refused to comment on any of the Bitcoin ETF applications submitted, Clayton pointed out that there could be (and there is eventually expected to be) a case where an application satisfies all their rules.

The chairman explained that he believes that blockchain technology and cryptocurrencies show significant promise. “It is demonstrating significant promise in the places where it’s consistent with our approach to capital raising in the past,” he added.

SEC continues to be criticized

The SEC has been heavily criticized by the crypto community for rejecting most of the Bitcoin ETF proposals over the past few years. Despite that, several companies have submitted competing ETF proposals to the commission. Earlier this year, the Chicago Board Options Exchange and SolidX re-submitted their application for a Bitcoin ETF. Last month, Bitwise Asset Management also submitted a similar proposal which it claims could ease the regulatory concerns of SEC.

Clayton declined to comment on any of the applications submitted to the agency. The SEC announced recently that it would soon begin the countdown period to either approve or discard the proposal submitted by VanEck and SolidX.

The SEC said the following:

“Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. by order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be disapproved.”

Earlier this week, Clayton reiterated his previous stance regarding Ethereum. He maintained that he doesn’t consider ETH and other similar cryptocurrencies to be securities due to their decentralized nature of operation. He, however, clarified to FOX Business that the position of a digital asset as security can change over time.

The continued delay in the approval of a Bitcoin ETF has somewhat affected the cryptocurrency space. Cryptocurrency enthusiasts believe that an ETF tied to Bitcoin would be the catalyst to attract institutional investors to the market which would help push the price of BTC higher. There is a belief that the entry of institutional investors will signal the beginning of mass crypto adoption.

The SEC will give its decision regarding the VanEck/SolidX proposal over the next few weeks, and the crypto community is hoping for something positive from the regulatory body.