Pressure Builds on SEC to Re-evaluate Bitcoin ETF 


Key Takeaways:

  • SEC Commissioner Hester Peirce issued comments in which she questioned the agency’s stance on spot bitcoin ETFs.
  • Peirce explains why the SEC’s lack of desire to accept spot products is “puzzling,” and also  elaborated on the rise of bitcoin as a financial instrument.
  • Peirce concluded her remarks by stating that, while she persists to challenge the SEC’s stance on bitcoin spot ETFs, she remains hopeful that the regulatory agency will change its mind.

SEC Commissioner Hester Peirce stated that a more “productive approach” to crypto regulation is in both investors’ and the SEC’s best interests.

The Bitcoin network is pretty unpredictable, with big financial institutions, governments, and business tycoons making important decisions, news, regulations, and announcements that cause the market to experience crazy price swings.

Hester was extremely critical of the SEC’s approach in her remarks at the “Regulatory Transparency Project Conference on Regulating the New Crypto Ecosystem: Necessary Regulation or Crippling Future Innovation,” but she continued to stay positive that the SEC could change course.

A bitcoin spot exchange-traded fund (ETF) proposal could cause a price explosion in the bitcoin market, which would have a significant impact on investors. Given its potential effect, this ETF filing appears to be quite promising. As stakeholders and crypto enthusiasts work to gain approval from the Securities and Exchange Commission in the United States (SEC).

Hester believes that the SEC’s unwillingness to deal productively with crypto users and developers over the last four years has resulted in sentiments of disbelief at the SEC’s perplexing, out-of-character approach to regulation.

“We can provide regulatory clarity, facilitate iterative experimentation, and pursue bad actors in the crypto space using the tools Congress has provided us and drawing on public input,” she added.

According to Peirce, the Commission should stop conclusively denying spot crypto exchange-traded products.

Until this year, she said, all futures-based exchange-traded products approved were subject to the 1940 Act. However, the Commission approved the first non-1940 Act ETP holding bitcoin futures for listing and trading on an exchange in April of this year.

Grayscale Investment LLC, one of the most outspoken challengers for the launch of such a product, has been attempting to transform its $13.8 billion Grayscale Bitcoin Trust (GBTC) into an ETF since April 2021. Since submitting its formal application in October 2021, the company has struggled the harsh, uncharted territory of spot bitcoin ETF regulatory approval in the United States.

Grayscale recently hired one of the top lawyers from former President Barack Obama’s administration to prepare for a legal battle with the SEC if the fund’s ETF application is denied again.

The bitcoin spot ETF looks encouraging, but there is some uncertainty surrounding its approval.  SEC approved the bitcoin futures ETF but rejected bids for the spot ETF. This appears to be discrimination, but the SEC claims that the spot ETF carries a high risk due to possible fraud and deception in the bitcoin market, as well as  fluctuations in the bitcoin price.

Hester believes that people involved in cryptocurrency should consider whether the laws, including securities laws, govern their actions. To accomplish this in a more integrated and efficient manner, the Commission must provide clarity that has previously been lacking.

“The SEC could work through issues with people in the crypto community with the goal of pragmatically achieving our regulatory objectives,” she said.

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