Here are the main reasons behind the SEC’s VanEck spot Bitcoin ETF disapproval order.
The SEC’s decision on VanEck’s spot Bitcoin ETF was no surprise for experts in the ETF industry. Most of them previously stated that no physically-backed cryptocurrency ETFs would become available in the country until the SEC finds a way of properly regulating the cryptocurrency trading industry.
Now, the industry has the official answer of the Securities and Exchange Commission, which highlighted numerous reasons in its official disapproval letter. But the positive side of their decision is that the commission acknowledges the importance of a physically-backed product that will provide additional protection to cryptocurrency investors.
The first highlighted the reason why the commission must disapprove of VanEck’s product proposal does not fall under the requirement of the Exchange Act, which states that the rules of a national securities exchange are designed to prevent fraudulent and manipulative acts and practices.
For bitcoin-based ETPs, the Commission has consistently required that the listing exchange have a comprehensive surveillance-sharing agreement with a regulated market of significant size related to bitcoin, or demonstrate that other means to prevent fraudulent and manipulative acts and practices. The listing exchange has not met that requirement here.
The abovementioned rule requires the financial product to provide full protection for its investors from any type of market manipulation that, as the SEC believes, is currently impossible for a product related to spot Bitcoin trading pairs.
Another interesting take in the Disapproving Order is that the commission does not believe that currently existing CME Bitcoin futures impact the price of the spot market; hence, the spot-based ETF is not essential. Previously, VanEck stated that the spot market is moving under the leadership of Bitcoin derivatives.
In conclusion, the main reason for the disapproval of the spot-based Bitcoin ETF still remains the same: inability to fully control the decentralized cryptocurrency market. But, in addition to it, the SEC gives us a hint: there is no point in listing such a product at this time since the existing futures-backed products are perfectly doing their part, according to their own research.
SEC’s Investor Advisory Committee to Discuss Crypto on December 2
- SEC’s Investor Advisory Committee will soon discuss crypto and digital assets today.
- This is to ensure serene investor protection and market integrity in the face of new technologies.
The US SEC’s Investor Advisory Committee is on its heels to discuss their nagging concern about crypto and ‘Investor Protection’ on December 2, 2021.
Truth be told, the panel will highlight all the ins and outs of digital assets with a special focus on the regulatory framework that governs them. With no exemption, the authority will take on this event to explore and identify the main lines of intersection of digital assets, sooner rather than later.
They hope to do this with a specific lens to examine the ups and downs of the market issues. Prior to this, the committee will further define the compounding risk and its associated dangers in the emerging technologies in the crypto market.
The SEC's Investor Advisory Committee will be discussing crypto tomorrow. It's a good opportunity for the Commission to rethink its approach to crypto regulation: https://t.co/0OQ5ig3VmP You can submit comments here: https://t.co/WDGSTZ3uhs— Hester Peirce (@HesterPeirce) December 1, 2021
On this note, apart from the crypto discussion, the panel will address various topics regarding blockchain technology, stablecoins, and crypto-based ETFs. All these topics will be treated publicly in one holistic manner under the event.
Moreover, the meeting agenda is quite a solid move that seeks to ensure smooth market integrity. In essence, it aims to also empower a good outlook when it comes to investors’ protection, particularly in the face of new technology.
People think that this occasion is a good opportunity for the SEC to rethink and restructure its harsh crypto regulation approach.
SEC Chair: Innovation Around DeFi “Could Be Real”
Gary Gensler believes that DeFi could offer “real innovation,” but he is convinced that the sector will not survive without regulatory compliance.
U.S. Securities and Exchange Chair Gary Gensler said that new technologies do not tend to persist if they fail to come into compliance with the law during a fireside chat with Jay Clayton at the Digital Asset Compliance & Market Integrity Summit.
While Gensler believes that decentralized finance could be the source of innovation, he claims that it has to fall within the existing regulatory framework:
The innovation around DeFi could be real, but they won’t persist if they stay outside of the regulatory framework.
Gensler also voiced his concerns about the centralization of some DeFi projects and implied that the goal of such projects might be to skirt existing anti-money laundering laws.
Speaking of the regulator’s reluctance to approve a spot Bitcoin exchange-traded fund, Gensler told No. 42 that trading around the globe is not inside the U.S. regulatory register. He urged the trading and lending platform to “come in and talk”:
Trading and lending platforms are really in an important place for investor and consumer protection. Come in and talk to us… work with us. Where appropriate we’ll use the enforcement tool. Work to get registered with the law.
The SEC boss has reiterated that stablecoins remind him of poker chips at a casino:
[Stablecoins] made it more efficient within the ecosystem. But it also allowed people around the globe, the people who tried to, to avoid money laundering and tax compliance in jurisdiction after jurisdiction.
According to Gensler, stablecoins are responsible for 80% of trading on the crypto market.
SEC Commissioner Will Not Say If Ether Is a Security
The SEC remains mum about Ether’s regulatory status amid accusations of picking winners and losers that come from the increasingly frustrated XRP community.
U.S. Securities and Exchange Commissioner Hester Peirce did not answer whether or not Ether, the second-largest cryptocurrency, is a security when asked by her Twitter follower.
Rather than analyzing the status of particular assets, I need to focus on building a sensible and clear regulatory framework for crypto.— Hester Peirce (@HesterPeirce) November 21, 2021
The “Crypto Mom” says that she is willing to build a “sensible and clear” regulatory framework for cryptocurrencies, but she will not focus on particular digital assets.
As reported by U.Today, SEC Chair Gary Gensler has repeatedly dodged the very same question on numerous occasions, making it clear that he will not speak about separate cryptocurrencies to remain neutral.
At the same time, the agency has distanced itself from a 2018 speech made by its former top official William Hinman, in which he famously said that Ether is not a security.
Amid the SEC’s almost year-long legal battle with Ripple, calls for regulatory clarity continue to persist.
Last month, Ripple CEO Brad Garlinghouse opined that Ether had managed to surpass XRP by market capitalization because of the SEC’s “free pass.”
Peirce, despite being a staunch crypto supporter for years, has refused to speak about the Ripple case since SEC Commissioners are prohibited to speak about ongoing litigation or enforcement actions.