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SEC Chair Jay Clayton says Bitcoin ETFs are making progress

The way Clayton described his agency’s concerns during a CNBC interview may be more telling than what he said

Securities and Exchange Commission chairman Jay Clayton looking as if he just heard a joke about stablecoins (via SEC)

Securities and Exchange Commission Chairman Jay Clayton said that agency is closer to approving a cryptocurrency ETF that would let retail investors invest in bitcoin through mainstream brokerage accounts.  

The U.S. regulatory agency has refused to allow exchange traded funds in the past. It is currently considering proposals from VanEck/SolidX Bitcoin Trust (partnering with Cboe’s BZX Exchange) and Bitwise Bitcoin ETF Trust (along with NYSE Arca).

Asked on CNBC on September 9 if the SEC was any closer to approving an ETF index fund, Securities and Exchange Commissioner Jay Clayton said, “The short answer is yes.”

A slightly longer answer included, “…but there’s work left to be done.” Which is fairly ambiguous.

The agency’s two main concerns remain the same as they were in March, when the agency postponed decisions on the Cboe and Bitwise proposals for the first of two times, he said. These are the ability of ETFs to custody cryptocurrencies and the concern that because they largely trade on unregulated foreign exchanges, price manipulation is easy. (On September 3, VanEck announced a plan to sell Bitcoin trust shares to large institutional investors rather than the broader retail market.)

In fact, market manipulation is rampant, Bitwise Asset Management told the SEC in a March 2019 report prepared as part of its ETF proposal. That report found that 95% of all bitcoin trades were fake, but proposed relying on a core of 10 honest exchanges it found.

What’s worth noting is the last thing Clayton said on the topic on Sept.9: “Now progress is being made, but people needed to answer those hard questions for us to be comfortable that this was the appropriate type of product.”

Compare that to the words Clayton used in a November 27, 2018 interview during the CoinDesk Consensus: Invest conference: “How that [manipulation] issue gets addressed, I don’t have a particular path. But it needs to be addressed.”

It comes down to this: “…needed to answer…” vs. “needs to be addressed.”

Does this mean the SEC will approve the Bitwise and VanEck/SolidX soon? Probably not. “[T]here’s work left to be done,” isn’t too ambiguous.

But Clayton seems to be saying that the agency is a lot farther along the path to being comfortable with an ETF that it was six months ago.

Tags: ArcaBats BZXBitwiseCBOECNBCETFsJay ClaytonSecurities and Exchange CommissionVanEck SolidX Bitcoin Trust ETF
" Leo Jakobson : Leo Jakobson, Modern Consensus senior editor, is a New York-based journalist who has traveled the world writing about meeting and incentive travel, as well as the consumer and employee loyalty business. He also covered the East Coast side of the Internet boom and bust, small businesses, and New York City crime, nightlife, and politics. Disclosure: Jakobson owns no cryptocurrencies.."