The Head of SEC yet again explained the Commission’s position on the approval of Bitcoin ETF funds. In an interview with CNBC, Jay Clayton reported that currently two factors prevent from making a positive decision. If something can be done with the first one, the second one is beyond the control of the department.
The first reason why SEC is not yet able to agree on Bitcoin ETF funds is the lack of custodial services development. Unlike securities or physical assets, Bitcoin should be stored on blockchain. It has already been proven that hot wallets do not provide an adequate security level. At that, cold storage wallets cannot provide the necessary transactions speed.
Coinbase and Gemini cryptocurrency exchanges, as well as Fidelity and Bakkt trading platforms have already developed cryptocurrency storage solutions. However, they still do not meet all SEC requirements.
The issue is that blockchain technology itself is just beginning to enter the world's financial system. It has not been sufficiently developed compared to other trading methods, and thus the Commission proceeds with caution. Cryptocurrency storage platforms were created just a few months ago; according to the Head of SEC, this is not enough for their comprehensive testing.
The issue with Bitcoin storage can be resolved; it resides exclusively in technological field. However, Jay Clayton drew attention to a more significant drawback of cryptocurrency market. The Commission pays special attention to course manipulations, which cannot be avoided.
Purchase of 21,000 BTC in April 2019 led to Bitcoin one-time increase by 20%, and it went up by more than 100% during the month. According to SEC, this is market manipulation itself.
Jay Clayton’s agency will be able to take control over American trading platforms; it will be in a position to limit the use of unethical methods of price control. However, it turned out to be powerless on Bitcoin market. Bitcoin blockchain decentralization and its global nature makes control attempts completely meaningless. Cryptocurrencies do not look like stocks and bonds, so the Commission has no leverage opportunity. However, SEC cannot allow asset trading that is subject to price manipulation.
Before the G20 meeting, the Ministers of Finance and Heads of Central Banks met in Fukuoka (Japan). The adopted communiqué says that cryptocurrencies now do not carry a threat for the global economy. It was recognized here that new technologies could improve the financial system. Therefore, it cannot be said that the authorities consider bitcoins and other digital assets as something sharply negative.
SEC policy on cryptocurrency is heavily criticized within the United States. Initiatives to transfer authority to control these assets to CFTC, the Commodity Futures Trading Commission, have been repeatedly made public.
While SEC proceeds with advanced caution in cryptocurrency, other countries are more decisive. For instance, several months ago cryptocurrency trade was started on SIX, the largest Swiss stock exchange. It is not surprising therefore, that Libra Networks was registered in this country. It’s exactly it who leads GlobalCoin development for Facebook Inc.