Market Manipulation Leaves Doubt on SEC’s Bitcoin ETF Approval, But Experts Remain Hopeful

The approval of Bitcoin Exchange-Traded Funds (ETFs) has become a topic rife with uncertainty and doubt. John Reed Stark, a former official of the Securities and Exchange Commission (SEC), has shared his assessment of the likelihood of a spot Bitcoin ETF gaining regulatory approval from the SEC.

On the other hand, Cathie Wood, CEO of Ark Invest, and Jay Clayton, former Chair of the US SEC, hold a more optimistic outlook. Let’s delve into these viewpoints to gain a clearer understanding.

SEC Rejection on the Way? Here’s What We Know.

• Based on Stark’s viewpoint, there is a potential impact of a Republican Presidency in 2024, which could be a boomer for spot Bitcoin ETF to obtain regulatory approval. Notably, he points to an important SEC comments letter submitted by Better Markets, an advocacy group, which highlights significant concerns surrounding the existing state of spot Bitcoin markets.

• The letter points out a major problem: trading volumes in these markets have been made to look higher than they actually are because of tricks like manipulation and wash trading. It also says that these markets are controlled by a small group of influential people who keep the Bitcoin network running. Because of these challenges, Better Markets worries that a spot Bitcoin ETP could be easily manipulated by criminals. 

• According to the letter, market surveillance tools alone are insufficient to detect and prevent manipulation, and the proposed regulation changes do not go far enough to address these risks.

• Stark also notices that such decisions about crypto rules at the SEC are often influenced by politics. He points out that the SEC started to get tougher when a Republican, Jay Clayton, was in charge. Clayton’s term included taking legal action against Ripple shortly before he left his job. However, he further mentions that Clayton’s opinions have changed and it should be easier for a spot Bitcoin ETF to get approved. He believes that the current rules might be too strict and should be looked at again. 

Read More: SEC Seeks Fresh Comments on ARK Invest & 21Shares Bitcoin ETF: Are Applications at Risk of Rejection?

How to Minimise the Regulatory Gaps? 

The analyst believes a positive regulatory change requires two things: first, the SEC should focus more on catching fraud and be open to allowing Bitcoin ETFs; second if Hester Pierce becomes SEC chair, efforts to control cryptocurrency might ease. Despite big players like BlackRock and Fidelity applying, the analyst expects the SEC to reject pending Bitcoin ETF requests in the end.

What do you think? Will the SEC approve a spot Bitcoin ETF in the near future?