The United States Securities and Exchange Commission (SEC) is currently looking over three Bitcoin exchange-traded funds (ETFs). One of these ETFs was filed just last week in order to keep track of two cryptocurrencies. A commissioner from the SEC said at a Consensus conference on Monday that the time is right for a Bitcoin ETF as the commission is due to make a decision on one of them next week.
At the Consensus conference this year, Hester Peirce talked about the regulatory environment for Bitcoin ETFs. in expressing her reasons against the current law, she said that the commission should be doing more to provide a regulatory framework for cryptocurrency including rules around safe harbour.
She was quoted saying:
“I thought the time was right a year ago — even longer than that … My first chance to comment on it was a year ago… Certainly the time is right, but there are still questions floating around the SEC that need to be answered as much as possible by you all.”
Peirce then encouraged the audience to contact the SEC to help them understand the market better. One problem that she noted though was manipulation within the market. She says that this “is a concern that people keep raising at the SEC… other issues like custody issues [also] come up a lot.”
The comment Peirce made at Consensus are similar to the speech at the Securities Enforcement Forum which took places on 9th May.
“The problem is that the securities laws do not cease to operate as a new industry develops,” she explained. “Consequently, individuals and companies in the industry must comply with our securities laws or risk becoming the subject of an enforcement action. It is therefore our duty as a regulator to provide the public with clear guidance as to how people can comply with our law. We have not yet fulfilled this duty.”
The commissioner went onto explain:
“It is not the SEC’s overzealous action that has stifled the crypto industry, but its unwillingness to take meaningful action at all.”
On top of this, she went onto express her worries that the United States is falling behind other forward-thinking nations.
Earlier this week she said:
“Our country has always been a country where innovation can really thrive. I worry that a lot of the activities are now happening offshore. I want the US to be the market for innovation.”
The SEC staff recently issued a 14-page document detailing a framework to assist issuers with conducting a Howey analysis to evaluate whether token offerings are securities. The document talks about features of an offering and actions by an issuer that might possibly suggest the offering is likely a securities offering.
The commissioner expressed her concern but she said that this framework, “could raise more questions and concerns than it answers.”
Peirce has said in the past that she believes the SEC doesn’t have the right to go looking at the underlying asset when considering whether to approve a proposed rule change for an ETF.
VanEck Bitcoin ETF
One of the proposals for a Bitcoin ETF under review by the SEC is the high-profile VanEck Solidx Bitcoin ETF.
“Cboe BZX Exchange Inc. originally filed the proposed rule change to list and trade shares issued by the Vaneck Solidx Bitcoin Trust in June last year. However, it withdrew the proposal on Jan. 22 due to the U.S. government shutdown which affected the SEC.”
The exchange re-submitted the proposed rule change for the same ETF at the end of January which was published in the Federal Register on 20th February.
Bitwise Bitcoin ETF
Another proposal is for the listing and trading of shares issued by Bitwise Bitcoin ETF Trust filed at the end of January.
This proposed rule change was published in the Federal Register on 15th February and on the March 29th, the SEC said that May 16th was to be the day they were going to make their decision (today). But on May 7th, the exchange filed for a change to the rule change, replacing the original one in its entirety.
According to the amendment:
“The trust will hold bitcoin … [and] will store its bitcoin in custody at a regulated third-party custodian, and will not use derivatives that may subject the trust to counterparty and credit risks.”
According to law from the SEC, the commission can extend the time to make a decision on an ETF up to 240 days after the date of its publication in the register.
So if a decision has not been made after 240 days for any reason, the ETF will be automatically approved.