SEC Could Approve the Bitcoin ETF if Conditions Are Met
According to the Chairman of the US security and Exchange commission Jay Clayton, the commission may approve Bitcoin ETF once preset conditions are met. Clayton recently told CNBC that he would get comfortable with approving Bitcoin ETF once a better market surveillance and custody is in place. The crypto market is to a larger extent unregulated and SEC thinks some group of people manipulate market prices.
The commission denied multiple cryptocurrency Exchange Traded Funds applications citing risks of fraud and manipulation. The commission has a jurisdiction from the federal government to develop regulatory frameworks to protect investors. The cryptocurrency space has been marred with many cases of fraud and scams arising from ICOs and Ponzi schemes.
“We’ve seen some thefts around digital assets that make you scratch your head,” Clayton said at CoinDesk’s Consensus Invest conference. “We care that the assets underlying that ETF has good custody and that they’re not going to disappear.”
Cryptocurrency enthusiast eagerly awaited the approval of what would become the first ever bitcoin exchange-traded fund. However, the US Security and Exchange Commission still remained hesitant to grant approval for any of the multiple ETF applications. Luckily the commission has come out with the requirements it wants to fulfill before any approval grant.
Implementing Market Surveillance and Custodial Services
According to Clayton, the difference in the monitoring tools cryptocurrency exchanges uses defies investment of a fair assessment of Bitcoins price. He explained that stock exchanges are fair because they use the same source of data which gives investors a clear sense of how prices change over time. While iterating on this, Clayton said;
“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation,” Clayton said at the Consensus Invest Conference in Manhattan. “It’s an issue that needs to be addressed before I would be comfortable.”
Stock exchanges like the New York Stock Exchange and NASDAQ have surveillance systems that monitor, prevent and investigate abusive on manipulative activities on the exchanges. The cryptocurrency trading market is yet to develop such capabilities.
Recently some cryptocurrency startups entered into a partnership with well-established stock exchanges. One of these startups is Gemini by early bitcoin investors, the Winklevoss Twins, partners with NASDAQ to obtain NASDAQ surveillance technology. Gemini hopes to provide a fair and rules-based marketplace for cryptocurrencies based on the NASDAQ data.
Countries like Hong Kong already developed regulations requiring cryptocurrency exchanges to employ custodial services. However in the United States regulations for third-party custodial service providers to cryptocurrency exchanges is not yet mandatory. Save storage of digital assets is another hiccup to the approval of the Bitcoin ETF. SEC thinks with regulated custodian investors remain at risk due to theft or hacks in the cryptocurrency vaults.
“We’ve seen some thefts around digital assets that make you scratch your head,” Clayton told Silver Lake Partners’ Glenn Hutchins, who moderated the panel. “We care that the assets underlying that ETF has good custody and that they’re not going to disappear.”
Exchange-traded funds track an index or group of assets but trade like stocks. Analysts say the approval of one could bring in a wave of institutional buyers. Because Bitcoin has a fixed supply theoretically push up prices.
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