The cryptocurrency community was dealt another blow Tuesday when the Securities and Exchange Commission said it had pushed back the timing of a decision on the first-ever crypto-related exchange-traded fund.
Despite the setback on the application submitted by VanEck and SolidX and the ensuing 10% fall in the price of bitcoin
, market participants remain upbeat that the delay was just that: a delay.
“I think it was broadly expected,” said Matt Hougan, global head of research at Bitwise Asset Management, when asked about the SEC’s decision to push back its ruling to Sept. 30. “It showed generally that the regulators are wrestling carefully but still [have] a number of issues that require clarity.”
Bitwise is keeping a close eye on the SEC decision. The San Francisco asset-management firm has its own proposal for a crypto-related ETF in front of the SEC, which differs slightly in that it tracks a market-cap-weighted index fund of the 10 largest cryptocurrencies, not a single digital asset.
Echoing Hougan’s sentiment is Colorado-based lawyer Richard Levin. “I think the agency is taking it seriously,” said Levin, whose work with the firm Polsinelli LLP involves regulation in the cryptocurrency industry. “They are getting more comfortable with the idea, but it may take some time, as they are doing what they have to do, which is protect investors and promote market integrity.”
Levin added that he believes a bitcoin-related ETF will eventually be approved, but, as to the timing, he doesn’t know.
Market integrity remains a significant concern for regulators. The underlying exchanges that a bitcoin-related ETF would track remain susceptible to manipulation due to a lack of liquidity and an absence of global coordinated regulation. On Monday, the Wall Street Journal published a detailed analysis of pump-and-dump schemes involving smaller digital currencies, further fodder for those who believe nefarious activity is prevalent in the trading of cryptocurrencies.
However, some attempts have been made to shore up exchanges. On April 17, then–New York Attorney General Eric Schneiderman said his office had sent out a fact-finding letter to 13 crypto exchanges, but, as of mid-July, the attorney general’s office, now under the direction of Barbara Underwood, had not made any announcements about these findings.
While the price of bitcoin continues to slump, making a fresh three-week low on Wednesday, Hougan said the delay is about the SEC doing its job. “We all like to move fast in the crypto space, and it’s the SEC’s job to put up some speed bumps.”
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