Skeptics Suspicious of Cryptocurrencies Urges SEC to Reject Spot Bitcoin ETFs

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Last Updated on January 7, 2024 by Bitfinsider

In a letter of commentary, the nonpartisan nonprofit Better Markets, which advocates for stricter financial regulations, has urged the Securities and Exchange Commission (SEC) to reject multiple applications that are currently pending for an exchange-traded fund (ETF) that would allow investors to trade Bitcoin. This product is highly sought after by supporters of the cryptocurrency market.

In the letter, Dennis M. Kelleher, the CEO and co-founder of Better Markets, warns that if the SEC approves a spot Bitcoin ETF, it will be a “grave threat” to investors, releasing “…a speculative, volatile, and socially useless financial product on tens of millions of American investors and retirees.”

According to Kelleher, the SEC’s approval of the spot Bitcoin ETF would create a risky precedent that would make it more difficult for the agency to prevail in future court cases and unleash a barrage of “propaganda” from the cryptocurrency sector urging “countless retirement savers…to diversify their portfolios” into the space.

Kelleher raised a number of particular objections to the adoption of a spot Bitcoin ETF in his letter. Kelleher disputes the idea that the Bitcoin market is developed enough to support an ETF on its own, pointing to the possibility of wash trading and the extreme concentration of Bitcoin in the hands of a small number of owners.

“The potential for fraud in the spot bitcoin market is so great that the rules of an exchange cannot permit the listing and trading of a spot bitcoin ETP and still be consistent with the requirement that the exchange’s rules be designed to prevent fraud and manipulation and protect investors and the public interest,” Kelleher stated.

“A simple chart showing that the price of bitcoin can lie flat for prolonged periods of time and then suffer from wild fluctuations during other periods of time indicates that a spot bitcoin ETP poses risks to the public that are inconsistent with the obligation to protect investors and the public interest,” writes Kelleher, seemingly arguing that Bitcoin’s volatility should disqualify the product from being offered to investors.

Kelleher concludes by labeling the possible licensing of the spot Bitcoin ETFs “a regulatory mistake of historic proportions.” She further argues that the regulated market is too tiny to prevent manipulation and that surveillance-sharing agreements would have little effect as a deterrent.

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