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A Glimmer of Hope for a U.S. Bitcoin ETF

Bitcoin ETF

  • U.S. Securities and Exchange Commission offers up Bitcoin ETF proposal to public comment
  • SEC remains concerned over whether a Bitcoin ETF is able to provide adequate protection for  investors against market manipulation

The day is always darkest before the dawn.

In the depths of despair, hope.

Such platitudes are cold comfort to the legions of Bitcoin maximalists chomping at the bit and waiting for a U.S. Bitcoin ETF.

With the U.S. Securities and Exchange Commission originally due to make a decision on asset manager VanEck’s Bitcoin ETF application today, regulators have now decided to buy some time by “polling the audience” to divine the wisdom of the crowds to make a decision on the matter.

According to a filing on Wednesday, the SEC has made clear that it has not yet reached a decision either ways on VanEck’s Bitcoin ETF application, but is now “seek(ing) and encourage(ing) interested persons to provide comments.”

The SEC has approached the public to consider whether they believe a Bitcoin ETF would be susceptible to manipulation and designed to prevent fraudulent and manipulative acts and practices.

The SEC has also asked whether Bitcoin is suitable to serve as an underlying asset for an exchange-traded product.

Existing SEC rules require that national securities exchanges protect investors and the public interest, but because Bitcoin trading occurs on both regulated and non-regulated exchanges, concerns remain that the liquidity and transparency of the Bitcoin market make it difficult to guarantee the availability of such protections, regardless of the instrument used for investment.

In terms of timeline, the SEC has already extended the deliberation window once, from May 3 this year to June 17, and has the ability to extend the deadline for deliberation in various increments up to a maximum of 240 days before delivering a final decision.

While no Bitcoin ETF has yet been approved by arguably the most important capital market in the world, Canada has green lit several cryptocurrency ETFs, and similar products are listed on European stock exchanges which function like ETFs.

Many Bitcoin maximalists see a U.S. Bitcoin ETF as being the next major leap forward for institutional adoption and a bullish factor that should fuel stronger inflows, but the market has been waiting for over 13 years for that to materialize.

Nonetheless, the Biden administration has thus far proved to be the most progressive in terms of its approach towards cryptocurrencies, with the heads of all the major financial regulatory bodies forming “sprint teams” to carve up their respective jurisdictions in regulating the nascent asset class.

In and of itself, cryptocurrency maximalists should see that the proactive approach towards regulation, instead of the hands-off style of previous U.S. administrations, is a major move forward for the industry.

For greater institutional participation in cryptocurrencies, clearer regulation needs to be laid out and given the fragmented governance structure that the U.S. maintains over its financial industry, carving out areas of responsibility is an important first step.

Unlike other countries with typically no more than one or two financial watchdogs, the U.S. financial industry is overseen by a complex web of regulatory agencies with overlapping and at times conflicting enforcement goals and objectives.

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