Spot bitcoin ETF approval hinges on big ask

The right way to get people in the US direct access to bitcoin via a simple button would be for exchanges to submit to surveillance.

Why it matters: It would meet the Securities and Exchange Commission’s request for a spot bitcoin ETF, but it’s a big one. The question is something of a unpopular proposition, on the border of unreasonable without more specificity, crypto industry leaders tell Axios, speaking under conditions of anonymity.

Context: A spot bitcoin ETF is one that can be bought on a standard stock exchange, and based on the actual price of bitcoin (not a derivative futures price, as some currently exist).

What they say: The SEC will have evidence that spot bitcoin ETF prices will be based on bitcoin markets that are “designed to prevent fraudulent and manipulative actions and practices” and “to protect investors and the public interest.”

There is a way to prove it, Dave Nadig, financial futurist at VettaFi, tells Axios.

• “To be clear, this is SEC leader Gensler’s idea, not mine,” Nadig said. “There has been a footnote in every refusal since Winklevoss’ refusal. This is a free card to get out of jail.”

How it works: Stock exchanges would register with the SEC and submit information – who, what, when and where – so that if something goes awry in the middle of the night, regulators could figure it out Why.

• The SEC said the way forward would be through a “comprehensive monitoring sharing agreement with a regulated market of significant size related to the underlying or reference bitcoin assets.”
• The New York Stock Exchange, Nasdaq and other trading platforms already do so under the Exchange Act, which constitutionally delegates authority to the SEC to regulate and enforce them.

The other side“Obviously it would be a huge pain in you know what. There are really obvious reasons not to want to do that,” Nadig said.

• The SEC has not released the details. Without that specificity, the stock exchanges do not know whether they can logistically comply with this question, say industry leaders.

Our thought bubble: The prospect of a bitcoin spot ETF is unlikely to make major digital asset exchanges subject to the level of scrutiny required by the SEC, given that it is not even a sure thing they would be able to list such an ETF in their marketplaces.

• Be smart: Let’s pretend for a moment that the SEC is a principal in high school, and a group of popular students exchanging cryptocurrencies who feel she has it for them. It is a confusing question to ask these students to volunteer on their private Instagram accounts and also all their friends’ data.

Status in the game: SEC and ETF issuers appear to have entered a dead end, pressuring Digital Currency Groups Grayscale Investments to pursue legal action in hopes of reversing the regulator’s decision.

• While the plan is in progress, other companies are submitting applications again in the face of a series rejection that began with the SEC’s blocking of the Winklevoss twins’ application approx. March 2017.

Intrigue: The SEC Commission Hester Peirce shouted in a public speech in June pointed out the regulator:

• “The Commission’s willingness to be persuaded, however, is about whether the Commission’s primary concern is a legal and logical connection with our approvals of bitcoin futures products and other commodity – based products, and not, for example, using the prospect of a spotbit bitcoin ETP approval as an incentive. to get exchanges to come in and register. “

Of note: Far from law enforcement and regulators who lack visibility, the advocacy group Access Now has called the present a “surveillance golden age.”