Amid concerns of market manipulation, is the SEC expected to approve a spot Bitcoin ETF?

Will the SEC Approve a Spot Bitcoin ETF Amid Concerns of Market Manipulation?

There is a lot of skepticism surrounding the approval of Bitcoin ETFs, especially when it comes to spot Bitcoin exchange-traded funds (ETFs). John Reed Stark, a former SEC official, shares his thoughts on the chances of a spot Bitcoin ETF gaining approval from the Securities and Exchange Commission (SEC). While some, like Cathie Wood, CEO of Ark Invest, and Jay Clayton, former US SEC Chair, are optimistic about the SEC approving a spot Bitcoin ETF, Stark believes that it may not happen before the US Presidential Election in 2024. He provides valid reasons to support his stance.

Factors at Play to Reject the Approval

Stark raises concerns about the potential impact of a Republican Presidency in 2024 on the regulatory approval of a spot Bitcoin ETF. He highlights an important SEC comment letter submitted by Better Markets, an advocacy group, which sheds light on significant concerns surrounding the existing state of spot Bitcoin markets.

The letter points out a major problem – trading volumes in these markets have been manipulated to appear higher than they actually are through tactics like wash trading. It also states that a small group of influential individuals control these markets, creating a risk of manipulation by criminals. Additionally, the letter argues that market surveillance tools alone are insufficient to detect and prevent such manipulation, and the proposed regulation changes fall short in addressing these risks.

Stark also notes the influence of politics on crypto rules at the SEC. He mentions that during Jay Clayton’s tenure, the SEC became stricter and took legal action against Ripple before Clayton left his position. However, he points out that Clayton’s opinions have since evolved, and he now believes it should be easier for a spot Bitcoin ETF to gain approval. Stark suggests that the current rules may be too strict and need to be reexamined.

How to Minimize the Regulatory Gaps?

Stark believes that a positive regulatory change requires two things. First, the SEC should prioritize catching fraud while also being open to allowing Bitcoin ETFs. Second, if Hester Pierce becomes the SEC chair, efforts to regulate cryptocurrency may ease. Despite major players like BlackRock and Fidelity applying for Bitcoin ETFs, Stark expects the SEC to ultimately reject pending requests.

In conclusion, the approval of a spot Bitcoin ETF by the SEC remains uncertain. While some industry figures and former SEC chairs are optimistic, concerns around market manipulation and the influence of politics still persist. It will be interesting to see how the SEC navigates these challenges and makes their decision in the coming years.