The SEC is starting to sound like one of those old LP records with a scratch in it, which keeps repeating the same chorus over and over again, ad nauseum. Latest estimates are that on more than 25 occasions, the SEC has either refused to make a decision or has chosen instead to delay its decision-making process out to the extent of its 240 day legislative maximum on any application having to do with a Bitcoin Exchange-Traded Fund (ETF). The news today is that two applications have been pushed to their maximum, mid to late October, while a third new entry has been postponed until September 29th.
The two ETFs already in the pipeline were proposed a while back and were sponsored by Bitwise Asset Management and VanEck/SolidX. The new entrant is from Wilshire Phoenix. The SEC’s resistance has been steadfast. Its chairman and staff are not comfortable with the crypto market for Bitcoin, let alone that for some of its larger rivals. The agency has often cited issues with price manipulation, market surveillance, volatility, security, and the lack of adequate custodial arrangements, as can easily be found in traditional exchange environments and markets.
For now, however, crypto enthusiasts and ETF promoters must wait until September 29, October 13, and October 18, as the next key dates in this exercise in apparent futility. Crypto advocates have always viewed a BTC ETF as the one key event that could drive easy access both for retail, as well as for institutional investors. The futures contract market is about to erupt, when Bakkt, ErisX, and LedgerX enter the fray with “physically settled” contracts. Current futures contracts on the CME are now settled in cash.
What is the SEC waiting for? Various development efforts are attempting to address each of its enumerated concerns, one by one, while Bitwise Asset Management has provided report after report that reveal that the Bitcoin market is much more “normal” than the regulator is willing to give it credit. Many of the market issues disappear after removing industry “fake” volumes, generated by wash trading, bot trading, and a host of other ways that volumes have been inflated. Once these data bits are eliminated, the Bitcoin market appears to behave as efficiently as other more accepted venues.
And yet the SEC remains intransigent. There have been some 34 firms that have voiced their support for the Bitwise proposal, including Blockchain Capital’s Spencer Bogart, Castle Island Ventures’ Matthew Walsh, Coinbase Custody’s Sam McIngvale, and the Blockchain Association’s Kristin Smith. The agency continues to request comments from the public, which, based on past revelations, have included very negative diatribes by a few of the industry’s skeptics that never cease to avoid an opportunity to complain.
Bitcoin is not without support within the agency, but Chairman Jay Clayton continues to hold back or delay. To its credit, the SEC did recently publish a request for blockchain support, preferably from an independent outsourced third-party. The contract would be for one year and could extend longer and to other support areas, but the belief is that the agency is preparing a set of “tools” that will allow it “to support its efforts to monitor risk, improve compliance, and inform commission policy with respect to digital assets.”