SEC Chairman Jay Clayton Won’t Approve Bitcoin ETF Until Exchanges Deal With Market Manipulation
Eagerly waiting for the Bitcoin ETF to arrive? Well, SEC Chairman Jay Clayton seems to be in no mood of granting it anytime soon. Speaking at the Consensus: Invest conference, Clayton said that he’s still not “comfortable” to approve the crypto ETF vehicle. Citing the reason behind it, Clayton says that the constantly hovering issues of market manipulation and the inability of exchanges to handle it, is what bothers him.
He says that concrete measures need to be taken to ensure a market free of manipulation, in order to proceed ahead with ETF-like financial products. “What investors expect is that trading in a commodity that underlies an ETF [needs to] makes sense and is free from the risk of manipulation. . . It’s an issue that needs to be addressed before I would be comfortable [adding digital currency ETFs]” he said.
Furthermore, CNBC reports Clayton saying that most cryptocurrency exchanges don’t have the robust and efficient market surveillance tools like the stock exchanges do. This doesn’t help investors to get a fair assessment of the Bitcoin price, he believes.
Clayton fives the example of Nasdaq and NYSE who have employed such tools that can deal with manipulative and abusive activities and prevent them from causing any damage to the exchange users.
“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade. . . When you see an asset trade on [the] Nasdaq or NYSE, there’s a great deal of surveillance preventing you and me from teaming up and pretending we’re decentralized. Those sort of safeguards do not exist in a lot of markets where digital currencies trade,” said Clayton.
To a certain extent, Clayton is right as we have seen numerous high-profile hacks in the crypto exchange this year along with other manipulation activities. Moreover, Clayton has also expressed concerns on the availability of secure custodial solutions. But we can say that there a fair amount of crypto companies out there who can provide safe custody of the crypto assets.
CoinDesk also reports that Clayton talked at length on treating Initial Coin Offerings (ICOs) as securities. “If you finance a venture with a token offering, you should start with the assumption that it is a security,” he said. While citing peculiar cases like XRP, Clayton said that there are some cases wherein you can’t determine the status clear-cut. He said that “some of these questions require a lot of information” without going into more specifics of that.
On the other hand “many (cases) are more obvious”. “I’m selling you my token, I’m going to go off and produce a venture and, hopefully, you’ll get a return for having purchased that token,” he explained. He also warns the crypto companies pitching tokens to investors. Clayton said: “If there’s a gap between what you’re telling [the SEC] and what you’re telling people investing in your venture, that’s not a good place to start.”