Btc news sec

An ETP disapproval order issued last month embodies the now standard denial rationale. While the Exchange states that the significant liquidity in the spot market and resultant minimal impact of market orders on the overall price of bitcoin mitigates the risk associated with potential manipulation, such assertion is general and conclusory. The Commission does not grapple seriously with important characteristics of these products and the underlying spot markets, including the widely distributed nature of trading in bitcoin and the methods used by these ETPs to calculate their net asset value.

It does not take into account the evidence from other jurisdictions where regulators have approved similar products. Absent a wholesale rejection of its now standard analysis, how does the Commission put itself in a position where it could approve these products? With each new disapproval, the SEC doubles down on its reasoning. The bitcoin market has grown, matured, become more liquid, and attracted more, and more sophisticated in the traditional financial market sense of the word , participants.

Many insurance companies, asset managers, university endowments, pension funds, large banks, and public companies have invested in bitcoin or are considering doing so. Increasingly sophisticated infrastructure has built up around bitcoin and crypto markets more generally.

Like the traditional finance landscape, the crypto terrain is dotted with trading platforms, trading firms, venture capital firms, hedge funds, law firms, and accounting firms. At what point, if any, does the increasing maturity of the bitcoin spot markets and the success of similar products elsewhere tip the scale in favor of approval? The futures-based approvals turn on the regulated nature of the futures market, the CME, which is where the assets held by the ETP themselves trade.

Why does this matter? Investors might prefer a spot bitcoin ETP to other options, and we ought to care about what investors want. This kind of product, depending on how it is designed, could enable retail investors to gain exposure to bitcoin through a securities product that, because of the effective ETF arbitrage mechanisms, likely would track the price of spot bitcoin closely.

It likely would be inexpensive to manage such a fund, so fees likely could be low. It would allow investors to buy and sell their bitcoin exposure the same way they buy and sell other exchange-listed products. Investment advisers too would find it easier to assist clients seeking exposure to bitcoin if a straightforward spot-based ETP were available.

Some people might object to retail exposure to bitcoin, and thus might oppose a product that makes it easier for retail investors to get exposure to bitcoin. Making it harder to access bitcoin, however, does not mean investors will not find other ways of doing so. Some do and will continue to hold bitcoin directly. For the reasons I mentioned above, however, many investors want to get exposure to bitcoin through US securities markets.

They have several options for doing so, but these methods can be a less direct and more expensive way to get exposure to bitcoin. They include holding shares of a fund that has bitcoin futures exposure, buying an over-the-counter product that lacks the arbitrage mechanism to keep prices in line with underlying bitcoin prices; buying a foreign spot-based ETPs, which are generally unavailable to U.

Are we really serving investors by keeping them in products that only approximate the exposure they are trying to get and might cost more? The Commission has deemed this question as irrelevant in its consideration of ETP applications. Many advocates of a spot ETP are bitcoin investors who want to see the price go up. An ETP certainly could influence the price of bitcoin, but bitcoin markets do not always perform as people anticipate. A spot-based ETP, because of the ease with which it can be bought and sold, would be a way for more voices to weigh in on the value of bitcoin.

Other types of ETPs have helped markets more efficiently incorporate information. Detractors of underlying ETP assets, therefore, can take comfort in the contribution that liquid, efficient markets play in working out the real value of those assets, whether they are shares of company, gold, or bitcoin. One feature of a non-sovereign, censorship resistant mechanism for storing and transferring value is its ability to function outside of the traditional financial system.

Why drag it inside tradfi and thus expose it to the meddling of incumbent financial firms and incumbent governmental regulators? It is time for the Commission to embark on a more productive path to crypto regulation. Instead the Commission has tried to cobble together a regulatory framework through enforcement actions. Enforcement is the appropriate tool to address the rampant fraud in the crypto space. One-off enforcement actions that represent the first time the Commission has addressed a particular issue publicly, however, are not the right way to build a regulatory framework.

For that, Congress gave us other tools, including the authority to craft tailored exemptions and notice-and-comment rulemaking. Enforcement actions short-cut the regulatory process. The Commission, in its settlement, set out a path pursuant to which BlockFi could register under the Securities Act and register or take steps to qualify under an Investment Company Act exemption from registration.

The specific path laid out in settlement agreement crafted between BlockFi and the SEC, if successful, is likely to become the standard for regulation of crypto lending. Other crypto lenders, users of those services, consumer advocates, and other interested parties were not part of those negotiations, but the results affect them. We might similarly consider, rather than a reactive enforcement approach, a proactive regulatory approach with respect to non-fungible tokens, stablecoins, decentralized exchanges, decentralized autonomous organizations, and other crypto innovations.

People doing things in crypto need to consider whether the laws, including the securities laws, govern their behavior. For this to happen in a more efficient and comprehensive way, the Commission needs to provide a level of clarity that heretofore has been absent. The SEC could think through issues with people in the crypto community with an eye toward achieving our regulatory objectives pragmatically.

We have a number of suggestions and examples of how to proceed. My colleague Commissioner Caroline Crenshaw set up a special mailbox through which she solicited commentary about regulatory issues related to DeFi. Similarly, J. Finally, a recent rule proposal that seems to implicate crypto platforms generated a number of comments from people and organizations willing to work with us on crafting an appropriate regulatory approach.

Now all we have to do is extend them a hand. Using the tools Congress has given us and drawing on public input, we can provide regulatory clarity, facilitate iterative experimentation, and pursue bad actors in the crypto space. I am looking forward to the upcoming panel, which I hope will include discussion of ways in which we can make substantive progress on regulating crypto responsibly. Investor protection is just as relevant, regardless of underlying technologies. In this context, I will first discuss crypto tokens and then crypto intermediaries.

Crypto Tokens Of the nearly 10, tokens in the crypto market, [2] I believe the vast majority are securities. Offers and sales of these thousands of crypto security tokens are covered under the securities laws. Why do I think a majority of crypto tokens are securities?

For the past five years, though, the Commission has spoken with a pretty clear voice here: through the DAO Report, the Munchee Order, and dozens of Enforcement actions, all voted on by the Commission. Investors are following crypto projects on social media and scouring online posts about them.

These tokens have promotional websites, featuring profiles of the entrepreneurs working on the projects. These are not laundromat tokens: Promoters are marketing and the investing public is buying most of these tokens, touting or anticipating profits based on the efforts of others. Investors deserve to be protected against fraud and manipulation. The law requires these protections. Given the nature of crypto investments, I recognize that it may be appropriate to be flexible in applying existing disclosure requirements.

Tailored disclosures exist elsewhere — for example, asset-backed securities disclosure [12] differs from that for equities. Our fundamental goal is to provide investors with the protections and disclosures they deserve — and that are required by law.

By contrast, in the case of a small number of crypto non-security tokens, they might meet some parts of the Howey Test or other tests of a security, but not necessarily all of them, and may not be securities. Do you represent any clients regarding their token projects? How exactly were you hired? Did you enter into an engagement letter? Other issuers in our capital markets also deserve to compete on a fair playing field. Before I turn to intermediaries, let me briefly discuss so-called stablecoins.

Stablecoins have features similar to, and potentially competing with, money market funds, other securities, and bank deposits, and raise important policy issues. Some stablecoins purportedly are backed by reserves of U. Other stablecoins, so-called algorithmic stablecoins, are not backed fully by fiat moneys and bear heightened risks related to whatever mechanisms are used purportedly to maintain a stable value.

Currently, stablecoins primarily are used as means to participate in, or as so-called settlement tokens inside of, crypto platforms. Depending on their attributes, such as whether these instruments pay interest, directly or indirectly, through affiliates or otherwise; what mechanisms are used to maintain value; or how the tokens are offered, sold, and used within the crypto ecosystem, [15] they may be shares of a money market fund [16] or another kind of security.

If so, they would need to register and provide important investor protections. The point is, it is important to look at the facts and circumstances of a product, not its label, to determine whether it is a crypto security token, a crypto non-security token, or another instrument. Intermediaries Given that many crypto tokens are securities, it follows that many crypto intermediaries are transacting in securities and have to register with the SEC in some capacity.

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