Bitcoin ETF should have been approved some time ago, SEC regulator Peirce says

Hester Peirce is puzzled.

For years, the Securities and Exchange Commission, of which Peirce is a member, has denied requests from stock exchanges and financial firms across the country to list securities that track bitcoin’s performance as a popular digital currency.

Earlier – say 10 years ago – concerns about potential market manipulation and liquidity might have made sense, but things have changed.

“This is probably the most important and most often asked question I get: When will the SEC approve a bitcoin exchange-traded product?” Commissioner Peirce said Thursday in an interview with CNBC.

“I thought if we had applied our standards like we applied them to other products, we would have already approved one or more of them,” she said. “With each passing day, the rationale we have used in the past for not approving seems to be weakening.”

The SEC applies a “single, enhanced standard” to deposits related to digital assets, she wrote in 2020. And she argued that the agency was asking potential ETF exchanges and sponsors for insurance to- beyond what it asks for the traditional, based on product equity.

“People with a regulatory mindset, when they come across something new like this, say, ‘Oh, wait a minute: the bitcoin market is a little different than we’re used to’”, Peirce said Thursday.

Now, she added, the bitcoin market is more like an established market with more institutional and mainstream investors participating.

“So I think the markets have matured a bit,” Peirce said.

New calls for an SEC-approved bitcoin ETF come just weeks after the regulator announced it would again delay its decision on whether or not to approve a VanEck request to list its Bitcoin Trust’s shares on the BTZ Chicago Board of Exchange Exchange.

Regulators said in a letter dated June 16 that they would take longer to solicit comments from the public. Specifically, the SEC is asking investors and academics for their views on whether bitcoin ETFs might be vulnerable to manipulation, or whether bitcoin itself is sufficiently dispersed and therefore resistant to similar sneaky tampering.

But Peirce, a Republican named one of the five SEC commissioners by former President Donald Trump, has long denounced what she sees as a double standard in her own agency when it comes to bitcoin products.

Perhaps her sharpest objection came from dissent in 2018, when she argued that the SEC should have approved an application filed by the Bats BTZ Exchange of the Chicago Board of Exchange to list and trade Winklevoss shares. Bitcoin Trust.

“By preventing the approval of cryptocurrency-based ETPs for the foreseeable future, the Commission is engaging in merit regulation,” she wrote at the time. “Bitcoin is a new phenomenon and its long-term viability is uncertain. It can succeed, it can fail. The Commission, however, is not well placed to assess the likelihood of either outcome, for bitcoin or any other asset. “

Three years later, VanEck’s current filing – similar to pending bitcoin ETF applications from Fidelity, Cathie Wood’s Ark Invest and several others – is seen by the industry as a litmus test of an SEC now led by an expert in cryptocurrency, President Gary Gensler.

His appointment as head of the SEC by President Joe Biden, and his subsequent confirmation in the Senate, has been greeted with optimism by many in the crypto community, as he is considered a man of experience in crafting new rules. financial.

Gensler, who taught cryptography classes at the Massachusetts Institute of Technology, is perhaps best known for his influential tenure as chairman of the Obama administration’s Commodity Futures Trading Commission. While there, Gensler helped design and implement a new swap market surveillance regime that was largely unregulated before the financial crisis.

So while Democrat Gensler may not necessarily agree with Trump-appointed Peirce, they can align with the desire for a more proactive SEC in bitcoin regulation.

Denying Bitcoin ETF applications not only presents the risk of a double standard, but can also leave thousands of investors with few more dangerous alternatives.

“The complications of not approving [an application] get stronger, because people are looking for other ways to do the same kinds of things that they would do with an exchange traded product, ”she said. “They are looking for other types of products that are not as easy to obtain. inside and out, maybe they’re looking for companies that are sort of related to bitcoin or crypto more broadly.

Bitcoin itself has had a violent start to the summer and has seen its price drop by over 40% in the past three months. Although it remains one of the most actively traded digital assets, some market watchers say bitcoin is at a critical juncture.

“It looks like he’s gearing up for a new $ 30,000 test, and that could be critical,” Art Cashin, UBS’s NYSE director of ground operations, said Thursday. “If you go over $ 30,000, traders will be looking to see if there is a trap, a cascade sale that ensues.”

Its dizzying ups and downs come as a growing number of businesses and banks, including payment companies Square and PayPal, have started to facilitate bitcoin transactions.

Meanwhile, Bank of New York Mellon said in February that it would start funding bitcoin, a key development as it is both the country’s oldest bank and a leading bank of keep.

Bitcoin was up 1.6% late Friday morning around $ 33,550.

Despite the volatile fluctuations in the currency’s price, Peirce remains convinced that a bitcoin ETF is behind schedule.

It is not the SEC’s job to approve or reject applications on the basis of the merits of the investment itself, she said Thursday, especially if the exchanges meet legal requirements to protect them. investors against fraud.

“Bitcoin is now so decentralized. The number of nodes involved in Bitcoin is large, and the number of people who have an interest in keeping this work decentralized is very large,” she said. “People should make their own decisions: if people don’t want to buy bitcoin because they think it’s being manipulated, they shouldn’t be buying bitcoin.”