Elusive Bitcoin ETF: Hester Perice criticizes lack of legal clarity for cryptocurrencies

Elusive Bitcoin ETF: Hester Perice criticizes lack of legal clarity for cryptocurrencies – Mail Bonus

The cryptocurrency sector may be evolving, but the clarity of digital asset regulation remains volatile.

This was recently underlined by Chief of Police Hester Peirce – also known as the “crypto mother” of the US Securities and Exchange Commission (SEC) – in comments she dropped at The Regulatory Transparency Project Conference on Regulating the New Crypto Ecosystem: Necessary Regulation or Cripling Future Innovation ? “

Peirce began his speech by emphasizing the importance of “managing a new crypto-ecosystem”. While this may be the case, Peirce also pointed out that the cryptocurrency industry is still looking for real regulators. She said:

“A bilateral bill that was introduced last week tries to answer that question. Some people in the cryptocurrency industry welcome the allocation of certain authorities to the Commodity Futures Trading Commission (CFTC) instead of the Securities and Exchange Commission. This view is probably rooted in the disappointment that the SEC has not used the more preventive authorities it already has to control cryptocurrencies wisely.

Noting this, Peirce added that she was “hoping we can change policy and use the current and future authorities wisely. However, before explaining how this could be achieved, Peirce was quick to point out that her criticism of topics such as the denial of Bitcoin (BTC) (ETP) is directed at the SEC Commission rather than its staff. “The staff appropriately follows the leadership of the Commission and the Commission has not been in the lead,” she said.

Regulatory issues for the cryptocurrency industry

Although a number of digital asset accounts have been approved this year, the first half of Peirce’s speech on approval instead of the Bitcoin ETP in the United States, which she mentioned, is the question she gets the most. While spot ETPs have managed to launch in other areas such as Europe and Canada – which saw $ 1 billion in assets under management a month after it was launched in 2022 – the SEC has continued to push for this offer.

Unfortunately, Peirce said she “has no idea” when the SEC would approve the Bitcoin ETP, and stated that “the Commission has added cryptocurrency-specific barriers to what used to be a fairly simple process to approve these merged investment instruments. In addition, although Peirce is aware that it is difficult to understand the Commission’s opposition to a local Bitcoin product, it stated that the Commission has “decided to discontinue everything related to Bitcoin.

Indeed, as the US cryptocurrency ecosystem continues to push, industry experts are still wondering whether the location of the Bitcoin ETP will be approved soon. Eric Balchunas and James Seyffart, an exchange-traded fund analyst (EFT) for Bloomberg, recently said that if cryptocurrencies fall under the SEC’s regulations, a local ETF could take place by mid-2023.

However, the bilateral cryptocurrency bill, also known as the “Responsible Financial Innovation Act”, introduced in the US Senate on June 7, 2022, has not yet decided whether the SEC or CFTC will be responsible for the allocation of digital assets.

Apart from that, the pursuit of Bitcoin ETP is still a tough one, especially for digital asset management companies like Grayscale Investments. Michael Sonnenshein, CEO of Grayscale, recently said that the company was preparing for a legal battle if Grayscale’s Bitcoin spot ETF was rejected by the SEC.

Shortly after the giveaway, Grayscale hired Donald B. Verrilli, a former lawyer in the United States, to join the firm to help push the Bitcoin spot ETF. At a press conference at Consensus 2022, Verrilli discussed in detail his plans to persuade the SEC to turn Grayscale’s Bitcoin Trust into a spot-based ETF.

According to Verrilli, the SEC’s approval of the Bitcoin futures ETF was in line with US security law, which showed that there was no significant underlying risk or fraud and treatment. As such, Verrilli believes that this has created a situation where the approval of the Bitcoin spot ETF should be treated in a similar way to future ETFs. He said:

“Administrative law is a federal law that governs the conduct of all federal agencies, including the SEC. It sets out rules on what kind of procedures institutions need to follow. One of the basic principles of this is that the organization is not “arbitrary and whimsical”. It is a sensible understanding that it is arbitrary and whimsical to treat issues that are the same in a different way, and that is the problem here for not giving consent on a one night stand.

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Peirce further explained in its comments that the SEC allowed futures-linked Bitcoin ETFs to start trading in October 2021, saying:

“Activating the change was a clear signal from President Gary Gensler, who pointed to the 1940 protection law, along with the CFTC’s oversight of future markets, as a key basis for its convenience with such products. These funds proved to be popular, but the demand for local products is still due to the fact that future products are more expensive to manage and may not monitor the spot price as closely. ”

Peirce explained the importance of local ETPs and noted that this type of product “could enable retail investors to gain exposure to Bitcoin through a securities product that, due to the effective ETF arbitrage system, would likely closely monitor the price of Bitcoin spot.” She added that it would probably be cheap to manage such a fund while sitting “comfortably in the brokerage account of investors along with other securities.”

In addition to the approval of the Bitcoin spot ETP, the clarity of regulations on stablecoins is becoming more important than ever. This has been the case mainly due to the recent collapse of the Terra ecosystem. Senator Pat Toomey, a senior member of the Senate Banking Committee, told the Cointelegraph that the Terra collapse was affecting legislation in the sense that it served as a “wake-up call” to the federal government.

“My own opinion is that the stablecoins algorithm should be treated separately from fiat asset-backed stablecoins. These are completely different creatures, “he said. However, Toomey added that there is currently no regulatory framework for stablecoin property insurance. However, he considers it important to make this clear and states that stablecoins supported by traditional instruments such as cash and securities are linked to a traditional financial system.

In light of this, it is important to note that Toomey recently drafted a regulatory framework for stablecoins, known as the Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or TRUST Act. This framework proposes that digital assets be identified as “payment tabecoins”, or a convertible digital currency used as a currency that the issuer can redeem for fiat. While the TRUST Act remains the framework, Toomey mentioned that a stablecoin regulation could appear by the end of 2022.

To highlight this, Kevin O’Leary – venture capitalist and chairman of O’Leary Ventures – told the Cointelegraph that while the bilateral bill, backed by senators Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York, deals with stablecoin regulations, he believes Toomey’s framework, along with ACT’s Stablecoin transparency backed by Senator Bill Hagerty, is likely to pass first:

“Both of these are similar in the sense that they only consider stablecoins. In terms of regulation, this indicates that stablecoins open for review every 30 days and that no asset inside these tokens can be there for more than 12 months.

According to O’Leary, this is money market policy. He added that Circle’s USD Coin (USDC) stablecoin did not break the dollar, even with recent fluctuations in the cryptocurrency market and the collapse of Terra. “There is much more promise today from something that is 100% supported by the US dollar than there is from something that is algorithmically backed.

Enforcement measures shorten the monitoring process

According to Peirce, the lack of clarity of regulations within the cryptocurrency ecosystem has proven that the SEC Commission requires a more productive approach to regulation. “The reluctance of the Commission to approve the replacement of the Bitcoin ETP is part of its general reluctance to build a cryptographic framework using standard control procedures,” she said in her speech.

As such, Peirce pointed out that the SEC had “merged the acquis with enforcement action. Peirce demonstrated this by referring to the BlockFi and SEC settlements that took place in February 2022.

She pointed out that the SEC laid the groundwork for BlockFi to register under securities law, which, if successful, could probably become the standard for managing cryptocurrencies. While noteworthy, Peirce explained that a better approach would have been to first identify cryptocurrencies that include securities law and then invite lenders and other stakeholders to discuss the appropriate way forward.

Toomey also mentioned that Gensler, the chairman of the SEC, was “pushing the limits of power,” and mentioned this last week at his press conference at Consensus 2022:

“I also think he claimed that almost all cryptocurrencies are securities without explaining how and why this is so. This is not fair because it raises concerns about enforcement action without anyone fully understanding what will lead to enforcement action and what will not. Enforcement is a terrible approach. ”

Optimism for change

Given the current regulatory environment of crypto, it is noteworthy that Peirce ended his speech on a high note, saying it was “optimistic that we can change policy,” as long as both investors and the SEC take a more proactive approach.

Although this “method” is still rather vague, some examples of how this can take shape have become a reality. For example, O’Leary explained that WonderFi Technologies, a distributed financial system (DeFi) platform, will be the first Canada-led digital stock exchange to be listed on the Toronto Stock Exchange (TSX).

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“TSX has never registered cryptocurrencies before, but asked WonderFi to sign up because they are fully compliant and that is the interest of organizations in the sector,” he said. O’Leary also mentioned that he believes cryptocurrencies will become the twelfth sector of the S&P 500 over the next decade due to potential digital assets, such as lowering high fees and accelerating financial services in various industries.

After all, WonderFi’s listing of TSX is important for US regulators because it shows how investors can work with regulators to make progress in the industry. O’Leary also mentioned that G7 regulators meet daily and stated that he believes the SEC sees progress in Canada as a potential use case that could work in the United States:

“Ontario regulators allowed the first Bitcoin and Ethereum ETFs. If the SEC had not approved this, the Ontario Securities Commission would never have allowed it. The Ontario Securities Commission is proving to other jurisdictions that these products can be controlled and issued.