Many cryptocurrency investors and entrepreneurs have anxiously awaited a green light from the U.S. Securities and Exchange Commission for the first bitcoin exchange-traded fund (ETF).
A bitcoin ETF would bring more products to Wall Street and give institutional investors more direct access to an asset class they are clearly very enthusiastic about in 2019.
Crypto capitalists like Cameron and Tyler Winklevoss even say they welcome the scrutiny of the SEC as well as institutional and federal regulation and oversight.
Join CCN for $9.99 per month and get an ad-free version of CCN including discounts for future events and services. Support our journalists today. Click here to sign up.
But the SEC has rejected every bitcoin ETF application it has ruled on so far.
SEC Chair Jay Clayton Wary of Bitcoin Reliability
Fox Business has an exclusive interview with U.S. Securities and Exchange Commission Chairman Jay Clayton, in which the SEC chair defended his position on cryptocurrency.
Clayton says he is not against digital currencies but “has concerns over the potential for manipulation and wants to ensure investors are protected.”
The SEC chair also says:
“What I’m concerned about at the moment is if it can be reasonably demonstrated that the underlying trading is generally not manipulated, it’s happening on reliable venues with good rules and that custody is something we can feel comfortable about.”
A “reliable venue with good rules,” you say?
That’s an excellent description of the Bitcoin blockchain and the underlying hardware infrastructure and software protocols to verify, maintain, and update the blockchain.
These qualities are in fact among bitcoin’s key selling points as an alternative form of money.
That the blockchain is a “reliable venue with good rules” is what has given the digital money minted by people running a homespun open source code project on their computers a total market valuation of tens of billions of dollars.
Those tens of billions of dollars feel quite comfortable about the reliability of the venue where many of them are parked and through which others flow.
And that the rules are good. But not only the rules. The software architecture that governs enforcement of the rules automatically and impartially is dangerously good too.
SEC is Chasing U.S. Business Overseas
The fact that bitcoin is already proven reliable and already has rules that are simple and understandable and work automatically is why it’s such a high dollar digital commodity.
Despite being in what people are calling a “crypto winter” since what was the bitcoin all-time high price peak in Dec 2017, investment demand for bitcoin has remained voracious.
That’s why so much money is flowing through the exchange of bitcoin right now that the world’s largest cryptocurrency exchange, Binance, paid dividends out of its profits last year to the tune of half a billion dollars to users of its trading token, binance coin.
By dragging its feet on the first bitcoin ETF, the SEC is leaving money on the table for Binance CEO and founder Changpeng Zhao to scoop up instead of a Wall Street broker.
That’s less money for the U.S. federal government to make on the domestic finance industry’s taxes as well. It’s really no different from Alexandria Ocasio-Cortez chasing Amazon’s cash out of Queens through her own campaign of fear, uncertainty, and doubt.
Honestly, many in the cryptocurrency community are probably happy for the SEC to drag its feet on legalizing bitcoin ETFs among other crypto investment products so the developers of cryptocurrency exchanges can continue to hog all the business and Wall Street just watches it happen.
Similarities Between ETFs & the Crypto Boom
Exchange-traded funds are shares of a fund that owns some asset, which are used and traded as securities. Many ETFs track an index for which the fund has purchased a proportional amount of the underlying equities. Others track commodities like oil, cotton, or gold that the fund actually owns. Others still are custom baskets of assets.
There is a remarkable similarity to the explosion of ETFs starting in the late 1990s and the explosion of over 2,100 cryptocurrencies in the wake of bitcoin’s introduction in 2009.
The very first ETF in 1989 tracked the S&P 500 and was traded on more than one exchange until an exchange successfully sued for the security to be de-listed. ETFs made their big breakthrough in January 1993 with Standard & Poor’s Depositary Receipts (SPDRs).
By December 2014, the total market capitalization or value of all ETF assets in the United States hit $2 trillion for the first time.
There’s a big appetite for bitcoin derivatives – and there’s a big appetite for crypto ETFs as well.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.