SEC Chairman Jay Clayton discussing Bitcoin at CNBC's Delivering Alpha conference, September 19, 2019 (via / CNBC)
Bitcoin,  United States

SEC’s Jay Clayton casts more doubt on Bitcoin ETF

Speaking at the Discovering Alpha conference in New York, the commission’s chairman said people who think an unmanipulated bitcoin price can be found are ‘sorely mistaken’

Securities and Exchange Commission Chairman Jay Clayton again threw cold water on the idea of listing Bitcoin on an exchange traded fund (ETF) anytime soon.

His comments came just two days after the Chicago Board Options Exchange cancelled plans to create a Bitcoin ETF open to retail customers. Cboe’s BZX Exchange withdrew a proposal to allow it to create the VanEck/SolidX Bitcoin Trust ETF on September 17. 

Half a year ago, the Cboe quit its bitcoin futures contract due to lack of interest and strong competition from rival Chicago Mercantile Exchange, which has its own bitcoin futures contract. The more crypto-friendly Commodity Futures Trading Commission (CFTC) regulates derivatives markets while the SEC focuses on the capital markets, including stocks and ETFs. 

Speaking at the opening of Discovering Alpha conference in New York on Thursday, Clayton was asked by CNBC’s Andrew Ross Sorkin if he sees Bitcoin ever being traded on exchanges under his purview. 

Clayton’s response was that for a Bitcoin exchange traded fund (ETF) to happen, investors need to have some assurance that they can see a fair and honest price. 

“I’ve said this for a long time,” Clayton said. “People see the price of bitcoin trading on whatever report it is. If they think there’s the same rigor around that price discovery as there is on the Nasdaq or New York Stock Exchange, and the protections, they are sorely mistaken.”

Noting that he was just speaking for himself, Clayton added, “we have to get to a place where we can be confident that trading is better regulated.”

If that sounds ominous, it’s worth looking at the video, available on CNBC’s YouTube channel and skipping to 26:21. The body language is fairly strong in suggesting that his skepticism is deeper than even his words suggest.

That was certainly the take of Georgetown University law professor and and general counsel for Ethereum-based lending pool Compound Jake Chervinsky, who tweeted, “[t]here will be no bitcoin ETF until either (1) bitcoin’s market structure and reputation improve enough to satisfy Chairman Clayton’s concerns, or (2) his term expires and someone with a more positive view takes over. If (2), expect an ETF in 2022 earliest.”

Clayton’s comments were a distinct departure from 10 days earlier, when he told CNBC that the SEC was getting closer to approving a Bitcoin ETF open to the general public. 

“The short answer is yes, but there’s work left to be done,” Clayton said on September 9, referring largely to the rampant market manipulation Bitwise Asset Management described in a March 2019 report to the SEC prepared as part of its ETF proposal. The company’s research said that 95% of all bitcoin trades were fake, but that a few honest and reliable exchanges existed. It proposed basing its pricing on 10 of those. 

Bitwise is moving forward with its proposal for a Bitcoin ETF, which the SEC had been considering in parallel with the Cboe BZX Exchange proposal. 

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.