The world of cryptocurrency has been abuzz with discussions about the potential approval of a Bitcoin Spot ETF by the U.S. Securities and Exchange Commission (SEC).
A recent tweet by John Reed Stark, a known figure in the financial regulatory space, sheds light on the SEC's current stance and the future possibilities surrounding this topic.
Current SEC's Stance on Bitcoin Spot ETF
John Reed Stark's tweet highlights that many are curious about whether the SEC will approve any of the recent applications for a Bitcoin Spot ETF. Stark's perspective is that the current SEC will not greenlight such an application.
He cites several compelling reasons, which have been brilliantly outlined by independent experts in their SEC Comment Letters dated August 8, 2023.
These letters were in response to multiple proposed rule changes by national securities exchanges to list and trade shares in spot bitcoin-based exchange-traded products.
Crypto and Partisanship
Stark notes that crypto regulation has become a partisan issue at the SEC, which is surprising given that crypto was not a partisan topic when he began writing about it in 2017.
He recalls that prominent figures like President Donald Trump, Secretary Hillary Clinton, and Congresswoman Maxine Waters all shared a similar view on crypto, deeming it a potential threat.
Furthermore, the SEC's crackdown on crypto began under the Republican-appointed SEC Chair, Jay Clayton, who was known for his critical stance on crypto.
The Future: Post 2024 Elections
Stark speculates that if a Republican is elected U.S. President in 2024, the SEC's approach to crypto might change. He believes that the SEC might:
- Reduce its crypto-enforcement efforts, focusing mainly on fraud cases.
- Become more open to approving a Bitcoin Spot ETF and take other crypto-friendly regulatory actions.
Concerns Raised by Better Markets
A compelling excerpt from Better Market's announcement of their Comment Letters was also shared. The excerpt highlights concerns about the spot bitcoin markets, such as:
- History of artificially inflated trading volumes due to manipulation.
- High concentration.
- Reliance on a select group of individuals and entities to maintain bitcoin’s network.
These factors make a proposed spot bitcoin-based ETP vulnerable to manipulation, posing risks to investors. Better Markets believes that the proposed rule changes do not adequately address these threats.
Criticism for the SEC
In a contrasting viewpoint, another Twitter user, Chartpunk, criticized the SEC's recent communication regarding Bitcoin ETF applications. The SEC has reportedly asked applicants to prove that the Bitcoin market is safeguarded against market manipulation.
Chartpunk argues that this demand is illogical, as all markets are theoretically susceptible to manipulation.
Furthermore, he points out the inconsistency in the SEC's acceptance of futures-based CME Bitcoin ETFs, given that any manipulation in the spot market would directly impact the futures market.
Chartpunk also draws a parallel with oil ETF products, noting that organizations like OPEC can influence prices with mere statements, yet oil ETFs have been in existence for decades. [pc]
Key Takeaways:
- SEC's Reluctance: The current SEC is not in favor of approving Bitcoin Spot ETFs due to concerns about market manipulation and other associated risks.
- Crypto and Partisanship: The regulatory approach towards crypto has become increasingly partisan at the SEC, with potential shifts expected after the upcoming elections.
- Criticism of SEC's Logic: The SEC's demand for applicants to prove the Bitcoin market's resistance to manipulation has been criticized as illogical and inconsistent.
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