Over the past two years, the SEC has been presented with over a dozen applications for a Bitcoin Exchange-traded Fund (ETF), but it has chosen in each instance to dismiss the bid, since they felt “uncomfortable”. Many of the issues cited are being dealt with today by industry participants and interested institutional players. Two new applications are now on the docket, but the SEC chose to delay decisions until the latter half of May. The commissioner of the SEC, Hester Peirce, who is also affectionately referred to as “Crypto Mom”, says these regulators are “dismissive of this space in a way that misses the point.”
As for the two BTC ETF applications, they come from formidable bodies that have already had prior rejections. Per one report:
NYSE Arca and Bitwise initially revealed plans to launch Bitcoin ETFs in January. NYSE Arca reportedly filed for permission to launch several Bitcoin-related ETFs in 2018. The exchange intended to launch five separate ETFs linked to both bull and bear futures contracts on NYSE Arca.
In this case, the SEC decided to extend the review period for 90 days. A decision is now expected by May 16.
The second bid originated from VanEck/”SolidX” in January, but was withdrawn when the government shutdown was in full force. The entity re-submitted its proposal in February. They will also receive assistance from the CBOE in the futures arena, but even with these enhancements, the SEC punted, pushing its final decision out to May 21. Even though there have been many positive changes in the crypto industry and new research reports that deal with troublesome issues for the SEC, crypto experts are not confident that any approvals will be forthcoming in 2019.
Peirce is one of five commissioners at the SEC, but she is known for being more supportive of all things crypto than her colleagues. She felt the SEC erred when it ruled against the ETF proposed by the Winklevoss brothers. Per one report:
The decision to reject the Winklevoss ETF (which gave rise to her dissent in July 2018) “had the whiff of merit regulation,” she said. In other words, it was rejected because the SEC thought the product was materially bad for investors, Peirce said, not because it fell foul of the SEC’s mandate to promote well-functioning markets. The ETF was rejected because the SEC lacks tools to understand underlying bitcoin markets that dictate the ETF’s value, not because, she said, the product itself was bad.
Peirce has also defended the SEC, saying that the agency is trying hard to get up to speed on the crypto industry. Outsiders may disagree with her assessment to date, but she has also said:
I want to see a bit more action here,” while also adding: “In general, the agency hasn’t been great on innovation and so this is sort of the natural area for me to be looking at because this is where innovation and the SEC are meeting.
It is also important to note that Peirce is not one to support over regulation, something she fears at the moment, as new legislation comes to the fore. Her position is that the market has always been better at determining what investment securities are right for investors.
Peirce’s recent comments are indicative of this line of reasoning:
I don’t know whether this product or another exchange-traded product would be good for investors, but I think investors can make that decision better than I can. Sometimes things that [require fighting for] make it to market and they fall, and that’s the way it is, but that’s the market’s decision.
In the meantime, the SEC still has two key decisions to make. In that regard, it has recently posted a new job description for an attorney that is a crypto expert to guide Jay Clayton, the chairman of the SEC, on developing issues in the crypto space. Peirce, a former lawyer, would please crypto enthusiasts if she were to guide the new recruit to be one more supportive individual within the agency going forward.