SEC rejection of the last outstanding BTC ETF proposal: an appraisalStablecoins and CBDCs dominated regulatory pronouncements during February 2020Other noteworthy developmentsConclusion
Thursday, 12 March, 2020
The Digital Regulator
USA once again rejects an ETF on bitcoin
The US Securities and Exchange Commission (SEC) has rejected the last outstanding Bitcoin (BTC) ETF proposal. It was the ninth rejection in a row. The decision taken by the SEC attests to the controversial decision-making process within the SEC, which contrasts with the pragmatic, inclusive and innovation-friendly approach taken by other jurisdictions such as Switzerland. Furthermore, it stifles financial innovation and delays the adoption of cryptocurrencies in the country, promoting an unregulated perimeter. The approval of the first BTC ETF emerged as a watershed moment for cryptofinance adoption in the USA.
Regulators around the globe multiplied their pronouncements and initiatives in the area of stablecoins during February 2020. Stablecoins are seen as a promising way to enhance the cross-border payment system and remedy related inefficiencies. However, the pronouncements also indicate that the approval of any stablecoins will be subject to strict evaluation and approval criteria, including KYC and AML aspects.
SEC rejection of the last outstanding BTC ETF proposal: an appraisal
The rejectionrejectionlink1 of Wilshire-Phoenix’s BTC ETF proposalby the SEC on 26 February 2020 was the ninth denial of such proposals in a row. It came after multiple postponements and was followed by official dissentdissentlink1 by SEC Commissioner H. Peirce1.
The decision taken by the SEC stifles financial innovation, delays the adoption of cryptocurrencies and promotes an unregulated perimeter in the USA. It attests to the controversial decision-making process within the SEC, which contrasts with the pragmatic, inclusive and innovation-friendly approach taken by other jurisdictions such as Switzerland (where the world’s first listed cryptocurrencies exchange traded product (ETP) was introduced in 2018).
The SEC has denied all BTC ETF proposals so far. The internal decision-making process has witnessed increasing disagreement within the agency, culminating over time in multiple delays, additional consultations and public dissent by one of the three Commissioners. The systematic increase in the qualifying requirements have created standards for approval of BTC ETF proposals that are higher than for ETP proposals in any other alternative asset class (e.g. commodities). Against the backdrop of the steady adoption of cryptocurrencies, the absence of an approved BTC ETF vehicle is obliging US investors to seek access to such products outside the safety net that securities laws would provide. Such access is likely to be found outside the US jurisdiction, fuelling financial innovation outside the country. On balance, the history of BTC ETF rejections in the USA contrasts with the more inclusive, innovation-friendly and pragmatic approach followed by a jurisdiction such as Switzerland (home of the world’s first listed cryptocurrencies ETP).
Stablecoins and CBDCs dominated regulatory pronouncements during February 2020
Global regulators renew their focus on stablecoins and recognise the need to enhance the cross-border payment system
Pronouncements by regulators about Central Bank Digital Currency (CBDC) continue and suggest CBDC will remain a key topic during 2020
Other noteworthy developments
SEC Commissioner H. Peirce proposes ways to enhance the legal security of digital assets
The International Organisation of Securities Commissions (IOSCO) has addressed secondary trading venues for crypto-assets
The month of February 2020 was marked by the US SEC rejection of the last outstanding BTC ETF proposal. The event vividly illustrates the different approach followed by the US jurisdiction towards cryptofinance innovations, compared for instance to jurisdictions such as Switzerland. It also points to growing tensions in the decision-making process within the SEC. In the end, the approval of the first BTC ETF proposal has emerged as the watershed event for the development of cryptofinance in the USA.
1Also known as "Crypto Mom". ↵
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