A week after the Securities and Exchange Commission (SEC) dished out massive fines and closed a prominent “decentralized” exchange, its chairman is dashing hopes for Bitcoin Exchange Traded Funds (ETFs) one more time.
Speaking at a recent conference, chief US financial watchdog Jay Clayton said he is not convinced digital asset markets are free from manipulation, so blockchain bigwigs should probably cool their jets.
After prefacing his views with disclaimers, Clayton noted the market-wide lacking of adequate market surveillance and ‘head-scratching’ security breaches as primary contributors to his distrust of cryptocurrencies, reports CNBC.
“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation,” Clayton told an audience of blockchain-keen investors. “Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade.”
As the name suggests, ETFs are special investment funds that track an index of assets (in this case, cryptocurrencies). They’re different, though, in that stock exchanges list them, and investors can trade them similarly to regular assets.
Clayton also stressed the importance of securing the digital assets underlying the proposed ETFs. He even declared himself unimpressed by the recent flood of cryptocurrency custodial services now on offer.
The SEC chairman then took time to hammer securities law into the heads of entrepreneurs looking to tap the US cryptocurrency market: if you raise funds with a token, more than likely the SEC considers it a security – so take the necessary precautions to ensure you don’t wind up on the wrong side of the law.
Most recently, the SEC fined two cryptocurrency startups $250,000 each after they raised money via initial coin offerings (ICOs), but failed to register their tokens as securities. Authorities then ordered both to return all investor funds and start their ICOs again should they want to continue operating.