When in doubt, punt, an old adage that applies when conservative individuals do not have the courage of their convictions to move forward in a positive manner. The SEC has decided, once again, to delay not one, but two decisions regarding applications for the much anticipated Bitcoin Exchange-Traded Fund (ETF). Crypto enthusiasts did not hold their collective breath this time around, although two proposals, one significantly more prepared to accept the “baton”, were both stymied from crossing the finish line.
The SEC staff preferred to follow another adage, the one that goes “kick the can down the road”, which is similar to a “punt”, but at least you do not give control over to the opposition. There had been great anticipation a week ago because Hester Peirce, one of several commissioners at the SEC and affectionately known as “Crypto Mom”, was scheduled to speak at the largest crypto confab of the year, i.e., Consensus 2019. Many crypto enthusiasts were hoping that she would announce that the SEC had finally taken a step forward to support innovation and had given the green light to a Bitcoin ETF.
Unfortunately, Ms. Perice had no good news to bring to the conference, but her remarks still rang true to the attending throngs: “There is a lot of excitement, enthusiasm, and hard work here in the U.S. What is depressing to me: our country has always been the place where innovation can really thrive, and now a lot of activity is happening offshore.”
When asked if this was the right time for the SEC to approve a Bitcoin ETF, she replied: “I thought the time was right a year ago… but there’s still questions that need to be answered by you [the audience].” She cited market manipulation as a chief concern, one that raised its ugly head last Friday, when “one recalcitrant trader dumped a 5,000 Bitcoin sell order on the Bitstamp exchange last Friday in a move labeled as a blatant attempt at price manipulation.”
Did this one isolated event influence the SEC’s decision to delay? We may never know that answer. The SEC did not offer up any rationale for its decision to delay. It did open another period for public comment, asking the public to weigh in on 14 separate questions over the next 35-day period.
The SEC’s actual statement read: “The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,’ and ‘to protect investors and the public interest.’”
This time around, the crypto market took the news quite well, barely bouncing 1 or 2% about, whereas when prior disapprovals were made public, several cryptos went into panic mode, shedding as much as 23% of their value. The VanEck/SolidX ETF proposal was thought to have an inside track, due to its collaboration with the CBoE exchange, but such was not the case.
Securities lawyer Jake Chervinsky, who has been actively covering Bitcoin ETF proposals, gave it little chance, when he tweeted: “I’d be shocked if the SEC approved the first ever bitcoin ETF after six years of denials without taking all the time allowed by law. Moving slowly makes the SEC appear thoughtful & thorough.”
Dáire Ferguson, chief executive officer of Irish online currency platform AvaTrade Ltd., put a positive spin on the decision to delay: “The approval of an ETF would obviously be a huge thing for the crypto community. There is optimism in the market due to the recent bull run, and that optimism seems to spill over the SEC delays and negate any negative views of hopeful investors. The general feeling is that progress is made every day, little by little.”
Gabor Gurbacs, VanEck’s director of digital strategy, took the decision in stride: “We continue the hard work towards better-regulated, safer and more liquid digital assets markets. Bitcoin is too big to ignore.” The new decision day is now August 19, but Jake Chervinsky notes in a tweet that the SEC “can & likely will delay one more time for a final deadline of October 18.”
Hester Peirce also had words of good counsel, as well: “I tell everyone ’Don’t hold your breath’. If I had my way, we would have already had one and maybe we would have had more… Investors should keep doing what they’re doing and not put too much weight in whether the SEC approves something or doesn’t approve something. Because these processes can take a very long time.”