According to Hester Peirce, the commissioner of the Securities and Exchange Commission (SEC), having an exclusive regulator overseeing the development of cryptocurrencies in the US may not be the best strategy. She told CoinDesk TV in an interview on Thursday that the SEC has adapted to new technology over the years and it shouldn’t be any different with crypto.
“I have a few problems with that,” said Peirce. “If you build another regulator in Washington, you normally only get all of the existing regulators plus one.”
Regulation was at the forefront of Bitcoin and cryptocurrency discussions in 2021, when bigger players started jumping on the Bitcoin bandwagon last year. Larger investors usually require a higher level of regulatory clarity, as large investments in an uncertain environment can mean significant risks.
Earlier this month, a cohort of CEOs from well-known cryptocurrency-related companies joined the U.S. House of Representatives to discuss how the new technology could fall under the existing regulatory framework as lawmakers tried to grapple with new concepts of the decentralized network. Many executives, including Coinbase Inc. CFO Alesia Haas, called for new laws to be developed, arguing that existing laws could not accommodate the new technology.
A few weeks after the hearing, Senator Cynthia Lummis announced that she had started work on a bill on the subject that would cover everything from categorization to taxation of cryptocurrencies. The bill is due to be presented to her colleagues next year and includes a proposal to create a regulator solely for Bitcoin and crypto.
A central aspect of Bitcoin regulation this year related to Exchange Traded Funds (ETFs). In October, the SEC approved the first bitcoin-linked ETF in the US, the derivative-based ProShares Bitcoin Strategy ETF. Despite the initial excitement that caused the offering to become the fastest to ever hit $ 1 billion in fortune, increased costs and active management issues drove investors away from the vehicle as the ProShares ETF is in futures contracts on Bitcoin and not invested in the asset itself. The phenomenon led many to ask for a spot offer to trade in the US markets.
The first filing with the SEC for a spot Bitcoin ETF dates back to 2013, when the Winklevoss twins offered an exchange-traded fund in the US that would invest directly in Bitcoin. The proposal was rejected by the Commission, which has followed in many similar submissions over the years. Last week, the SEC rejected two spot Bitcoin ETF filings from Valkyrie and cryptoin before the deadline expired.
“I just hope that we get our minds set on creating something that makes sense in terms of regulatory clarity rather than just going back to enforcement,” said Peirce.
Although SEC chairman Gary Gensler has said several times why such proposals were rejected, the real reasons seem obscure. The watchdog boss has urged Bitcoin firms and platforms to speak to the commission and “register” as concerns about their ability to protect investors and prevent fraud and tampering led the SEC Date declines every single suggestion that has been received on their desk. Peirce herself, an SEC insider, said she doesn’t understand why spot Bitcoin ETF trading still doesn’t exist in the U.S., arguing that the arguments used to justify the denials have been out of date for some time.
“I can’t believe we’re still talking about it like we’re waiting for something to happen,” said Peirce. “We have even issued a number of rejections lately, and these continue to use arguments that I thought were out of date at the time.”
While little has been done to advance a spot Bitcoin ETF proposal by the SEC, regulation is trying more than ever to keep up with Bitcoin, and 2022 could be a year when things change and such an offer US Becomes accessible to investors. Approval could be simply based on game theory, as SEC scrutiny led banking giant Fidelity to launch its Bitcoin fund in Canada after frustrated trying to do so locally. Applicants must meet investor demand for a suitable vehicle for direct rather than indirect exposure to Bitcoin price, and it will be up to the SEC to decide whether these products will be available in America or elsewhere.
“Chairman Gensler said he would like platforms to register with us,” said Peirce. “So maybe that’s what it takes for a spot product to be approved.”
Despite the US thirst for a spot Bitcoin ETF, such an offer is not strictly necessary and should be avoided by most investors. By buying and holding BTC themselves, retail investors can get better exposure to the Bitcoin price and thus also benefit from the manipulation and censorship resistance of the peer-to-peer network – something they would not get from a Bitcoin ETF . Institutional investors, on the other hand, could use MicroStrategy’s playbook and receive real bitcoins without moving the market. For other cohorts who cannot buy and hold Bitcoin themselves, it may be a matter of aligning their investment policies with Bitcoin rather than the innovative money curve in order to align with existing investment practices.