“The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change.”
The simple answer is that it can. The SEC may take up to 180 days to deliver an approval or disapproval. If required, they can also extend that period an additional 60 days.
With the VanEck and SolidX proposal submitted in July, the SEC is simply taking as much time as possible to consider all angles.
The SEC has also invited comments on the ETF, suggesting it is taking the review seriously.
The Delay Could be a Good Thing
The SEC is well within its rights to reject the bitcoin ETF proposal. You may remember the Commission rejected nine proposals back in August.
The fact that the SEC is taking the full time period to consider the VanEck proposal is a good sign.
There are pro-bitcoin commissioners involved in the decision, including Hester Peirce who said, “You all know that I am working on trying to convince my colleagues to have a bit more of an open mind when it comes to [crypto].”
SEC Concerns Remain
Having said that, the SEC still has major concerns over bitcoin ETFs. As the chairman of the SEC recently revealed, there are issues related to theft, market manipulation, custody, and money laundering that need to be addressed before we see an approval.
There is also concern over how ETFs track the price of bitcoin.
The three options include basing the price on crypto exchanges, bitcoin futures, and the bitcoin OTC market.
The SEC is nervous that exchanges are subject to manipulation. They think bitcoin futures are not yet mature enough, and OTC markets are difficult to track.
So there are big hurdles to overcome before the SEC approves any Bitcoin ETF proposal.
It Could Take Years
Speaking after the decision, Hester Peirce warned the crypto community not to place too much weight on the ETF approval.
“Don’t hold your breath. I do caution people to not live or die on when a crypto or bitcoin ETF gets approved.”
The Securities and Exchange Commission (SEC) has reminded crypto investors to be cautious about information posted to social media. According to the SEC, big social media accounts and “influencers” are often paid to promote crypto projects, tokens, and securities that might be fraudulent.
The reminder comes after the SEC fined two celebrities last week for promoting cryptocurrencies without disclosing they were paid to do so.
Boxer Floyd Mayweather Jr received $300,000 to promote three initial coin offerings (ICOs) to his large social media following, while DJ Khaled was paid $50,000 to promote Centra’s ICO. Neither individual disclosed to their followers that their endorsement was paid.
Mayweather was subsequently fined more than $600,000 and is banned from promoting securities for three years.
The SEC explained: “These cases highlight the importance of full disclosure to investors… With no disclosure of payment, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
It’s a reminder to any crypto investor: do your own research. Don’t trust the opinions of others as you never know the true motivations behind their advice.
1/2 SEC ENF Co-Dir Peikin: “Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements…
2/2 … Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds.” https://t.co/WzgvPU7Esg
It’s the question on everyone’s lips right now: when are we getting a bitcoin ETF?
If, and when, a bitcoin ETF (exchange-traded fund) is approved, it would provide an easy way for institutional investors to get exposure to the crypto market, without having to buy or store bitcoin itself.
Many see the approval of a crypto ETF as a game-changer and the catalyst for a market recovery.
But if discussions at this week’s Consensus event are anything to go by, that bitcoin ETF approval date might keep moving further back.
One of Clayton’s biggest concerns is the threat of theft in the cryptocurrency market. Almost $1 billion worth of crypto has been stolen from exchanges this year alone and that number is weighing on the SEC’s decision.
“We’ve seen some thefts around digital assets that make you scratch your head,” Clayton explained.
Before we see the approval of a bitcoin ETF, we need an infrastructure of safe, reliable crypto storage.
2. Better Custody of Bitcoin
As Clayton went on to explain, “we care that the assets underlying [the] ETF have good custody, and that they’re not going to disappear.”
Custody and storage solutions are on the horizon. BitGo is one of the pioneers in digital asset custody services and many others are cropping up.
However, even with all the progress, Clayton maintained that these services “need to be improved and hardened.”
3. Market Manipulation
There’s still a dark cloud hanging over the crypto market in terms of price manipulation. It’s one of the key reasons cited by the SEC when rejecting previous ETF proposals.
In Clayton’s words, “what investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation. It’s an issue that needs to be addressed before I would be comfortable.”
He did at least offer a hint into what mechanisms the SEC is looking for to counter manipulation:
4. Market Surveillance
Traditional stock exchanges are monitored by smart surveillance systems which spot signs of manipulation and wash trading.
“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade.”
Again, there are improvements on the horizon. Nasdaq’s new bitcoin futures market, for example, will integrate some of those surveillance features into the crypto trading arena. Similarly, the Gemini exchange (owned by the Winklevoss Twins) struck a deal with Nasdaq to integrate its surveillance technology.
Better regulated exchanges are likely to be a key requirement before a bitcoin ETF is approved by the SEC.
5. Anti Money Laundering Protections
The final point of contention comes down to anti-money laundering. In order to counter money laundering in the crypto space, exchanges would need to implement the following:
Despite the excitement around the pending approval of a bitcoin ETF, we’re still a long way from satisfying some of the key concerns. Progress is being made, but it may be some time before that approval date comes.
Is there a future where every country launches its own digital currency?
What is the Definition of a CBDC?
A central bank digital currency is a cryptocurrency issued and controlled by a government, central bank or federal regulator. It’s basically a homegrown cryptocurrency dedicated to and ran by a country.
One of the main drawbacks of widespread crypto adoption is the lack of regulatory control. The implementation of nation-state CBDCs across the board could immediately fix those problems. They could be fully regulated by the state. CBDCs are not decentralized like many cryptocurrencies and represent real money in a digital way.
Governments or central banks would become not just the issuer of the digital currency, but also the regulator. It may offer the security and stabilization that is sometimes lacking with fluctuating digital currencies such as bitcoin.
“They’ve dollarized our prices. I am petrolizing salaries and petrolizing prices. We are going to convert the petro into the reference that pegs the entire economy’s movements.”
However, the petro cryptocurrency is shrouded in controversy. It has been called a scam by the American authorities, who claim the country is using the petro to skirt US sanctions. Many crypto-enthusiasts have also slammed the idea due to its centralized nature. All of these criticisms are valid.
But could this concept work for other nations who are dealing with collapsing economies or would it spark the end of the decentralized nature of cryptocurrencies themselves?
Pros and Cons of Implementing a Central Bank Digital Currency
There are arguments on both sides of the coin in regards to the adoption of central bank digital currencies.
The opinions largely fall into two categories: long-term crypto users who are opposed to the decentralization of crypto; and those who want to see wider adoption and integration of blockchain technologies and CBDCs to bring together a coordinated effort to regulate the industry moving forward.
The Pros of Using a CBDC
Those who seek greater regulatory measures applied to the cryptocurrency industry such as governments, central banks, and some potential investors are more open to CBDCs. Many believe that the pros outweigh the cons.
Boosting the economy – The Bank of Canada Economist, Mohammad R. Davoodalhosseini, claims that even large economies such as Canada and the US could greatly benefit from the implementation of a CBDC. Research from the Bank of Canada (BOC) showed that a CBDC “can lead to an increase of up to 0.64 percent in consumption for Canada and up to 1.6 percent for the US, compared with their respective economies if only cash is used.”
Stabilizing failing economies – As we have seen with the implementation of the petro in Venezuela, some economies in the oil trade who are dependent and attached to the US dollar can use a CBDC to reinvigorate their economy.
Greater regulatory cohesion – If the people who are issuing the CBDC are the same ones regulating it, greater regulatory cohesion will naturally follow. If a handful of countries adopt CBDCs and collaborate together in a coordinated effort, regulating the industry would be much easier than present.
Easy access and confidence – The implementation of a CBDC could help to speed up the process of widespread crypto adoption as the risks currently associated with using crypto would be less if backed by an entire country and a central bank. It would create more confidence in the market for investors.
The Cons of Using a CBDC
Although the introduction of a CBDC seems like a great idea from one point of view, some central banks think they won’t work. Even the Bank of Japan’s (BOJ) deputy governor, Masayoshi Amamiya has criticized the idea of central bank digital currencies. Here are some of the cons involved with issuing a CBDC:
Expensive setup costs – One of the major concerns for Masayoshi Amamiya and other central banks is that creating a CBDC is a costly affair. It’s not only banks that would be expected to implement new technologies but also the entire public sector, middle-men, and customers. As a CBDC is a state-run enterprise, taxpayers would be footing the bill.
Loss of financial privacy for users – The most discussed negative issue against CBDCs is the centralized nature of the concept. Most long-term crypto enthusiasts and other anti-establishment types champion bitcoin and other cryptocurrencies because of their privacy and independence from central banks. A CBDC goes against that philosophy.
Knock-on effect to pre-existing financial systems – Although introducing a CBDC may work for failing economies, it’s not efficient for larger nations that currently have a massive presence in the global financial markets and successful pre-existing financial systems.
The Imminent Future of CBDCs
At the time of writing, the only nations using a CBDC are Senegal, Tunisia, Marshall Islands, and Venezuela. Although Iran has also been researching the possibility of introducing one for similar reasons to Venezuela.
Central Banks might well feel they are being left behind in regards to distributed ledger technology that could very well revolutionize the global financial markets as we know it. Thailand is one such nation that is embracing blockchain and considering its own CBDC. When recently talking about the issue with the Bangkok Post, a spokesperson for The Bank of Thailand said:
“Technological changes are having a major impact on financial services. The Bank of Thailand and local financial institutions agreed to launch a project to raise technological readiness in adopting new financial technologies to enhance operational efficiencies. Creating an ecosystem conducive for collaborative learning in technology will be an important driving force towards a digital future.”
Although Thailand is currently only in the planning stage, they believe that by early next year, their very own central bank digital currency will be unveiled.
Central bank digital currencies are an interesting alternative for failing economies with struggling financial systems, but not so much for economic powerhouses that already dictate the global markets at this current time.
However, the evolving nature of the financial markets and distributed ledger technology, plus pressure from governments, central banks and high places who are pushing for greater regulations and cohesion in the crypto marketplace, means that a CBDC could be coming to a country near you sooner than you think.
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