SEC Chairman Jay Clayton — Necessary Changes are Needed Before a Crypto ETF.
Despite the consistent rejections of Exchange Traded Fund (ETF) applications put forward to date, hopes are still high amongst some, that the upcoming ETF decision may finally be the one that gets accepted. That was until SEC chairman Jay Clayton calmed those hopes once more when he spoke at Coindesk’s Consensus Invest Conference this week.
During the fireside chat, Clayton expressed his concerns within the space that would need to be addressed before he would be ‘comfortable’ approving any cryptocurrency ETF.
“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.”
Clayton expressed his reservations with lack of market surveillance, mainly due to the fact that most cryptocurrency exchanges do not share the same monitoring tools, meaning investors may not see a genuine assessment of bitcoin’s price. The Winklevoss twins’ exchange, Gemini, is one of those that strives to meet these standards and become a secure way for investors to get involved with cryptocurrency. Yet even after partnering with the Nasdaq to give them access to these high level tools needed their ETF was declined by the SEC.
It would suggest then that no matter who puts forward an application a general cleaning up of the space and dismantling of unregulated exchanges worldwide is needed before any ETF proposal can be approved by the SEC.
“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade,
The custody of digital assets is also a major concern on Clayton’s list, especially since transactions on some of the crypto networks are completely irreversible and can be executed from anywhere in the world.
“We’ve seen some thefts around digital assets that make you scratch your head,” … “We care that the assets underlying that ETF have good custody, and that they’re not going to disappear.”
Companies including Gemini, Bingo, Ledger, Coinbase and even traditional banks including Bank Frick and Nomura to name but a few are already working on high level solutions to these issues. There are also reports that Goldman Sachs are exploring the issue and most notably Fidelity who are launching Fidelity Digital Investments to hold digital currencies on behalf of its investors. Despite these efforts, Jay Clayton expressed these solutions still “need to be improved and hardened.”