Bitcoin exchange-traded funds (ETFs) are long overdue for approval from the Securities and Exchange Commission. Although the regulator is reluctant to approve multiple ETF requests, it did not cite any strong reasons behind it.
In a Bipartisan Policy Center event called “The Year Ahead for Capital Markets” last week, the two US market regulators – the SEC and the Commodity Futures Trading Commission (CFTC) – shared their views on the Bitcoin futures and ETF market.
Explaining the SEC’s stand on Bitcoin ETF’s, SEC Commissioner Hester Peirce, also known as ‘Crypto Mom,’ said: “At the SEC we’ve been unwilling to … sign off on a bitcoin ETF, an exchange-traded product based on bitcoin.”
“My concern about our approach in that area is it looks a little bit like a merit-based approach judging the underlying bitcoin markets.”
Arguing on the present regulatory scenario in the crypto market, Peirce said that “there are lots of markets that aren’t regulated but we nevertheless build products on top of them.”
“I think we have to be very careful with that kind of reasoning,” she added.
The SEC, in the past, has rejected multiple pushes by major market players – including Chicago Board Options Exchange (CBOE) and Winklevoss brothers – to get approval for Bitcoin ETFs. CBOE recently resubmitted its application which is pending for a review with the regulator along with a similar filing by NYSE Arca.
Bitcoin Futures Market
CFTC Commissioner Brian Quintenz, on the other hand, expressed his views on Bitcoin futures and said: “We have a process in the Commodity Exchange Act that allows the exchanges to self-certify a contract if they believe it meets the requirements of the Act.”
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“[The CFTC] has a review period in which we can say no we disagree with you and here’s why, but if we don’t disagree, [then] they have the opportunity to go ahead and self-certify that contract,” Quintenz elaborated. “[Both CBOE and CME Group] pursue that self-certification [route] so these contracts get listed without our approval but also without our disapproval.”
CBOE and the CME Group launched Bitcoin futures in the market in December 2017, which pushed the digital asset, and also the market as a whole, to touch its peak. However, since then the coin is in a downturn losing more than 80 percent of its value.
As reported by Finance Magnates earlier this month, the Bitcoin futures market also took a hit since September last year as the trading volume is declining drastically.
SEC vs CFTC
A turf war is also going on between the two regulators for the control of the cryptocurrency market. Although Bitcoin and Ethereum fall under the CFTC’s purview, the SEC is still controlling the larger initial coin offering (ICO) market.
Explaining the difference between commodities and securities, Quintenz said: “We only have fraud and enforcement jurisdiction over the commodity space. Our oversight jurisdiction is over the commodity derivatives space, so the trading of commodities themselves like things like Ebay we don’t have any type of oversight over that.”
“Because of our lack of statutory oversight capability, I’ve suggested that these platforms come together to form some type of self-regulatory structure where they can discuss, agree to, implement, and hopefully examine or audit themselves,” he added.
Will We See a Collaboration?
Clarifying the current resistive regulatory standpoint on cryptocurrencies, Peirce stated that the market situation is “too confusing” and dropped a hint for collaboration between the CFTC and the SEC saying: “[This is] an area where I think Brian and I are interested in working together.”
“There [are] questions about where your jurisdiction ends and ours begins and again we don’t want to have overlap there so you know my main concern has been that I think we need to do a better job providing guidance,” Peirce told Quintenz.