Cryptocurrency is out of its infancy and preparing to deal with its growing pains, at least, according to Omniex advisor Shelia Bair it is.
In an editorial on CoinDesk, Bair compares the early stages of the crypto market to that of raising her children. When taking them out in public, she says, “no one cared if our kids failed to follow proper dining etiquette.” However, as her kids grew older, people began to expect more of them. Eventually, they are required to act more like adults and behave as such. To Bair, this growth is incredibly similar to cryptocurrencies.
At first, trading assets was a no mans land. There were no rules. Nobody expected much from cryptocurrencies. Instead, the market was full of enthusiasts, criminals, risk-takers, and more. There was no such thing as KYC or securities frameworks. If you went in expecting proper etiquette, you weren’t going to get it.
However, the crypto market is evolving. Nowadays, we see crypto exchanges looking to regulate. KYC and AML policies are consistently changing and being put in place. Banks are looking into these assets, and rules are coming to be. Bair supports this by speaking on the recent Bitcoin futures and regulations put in place by the Commodity Futures Trading Commission (CFTC):
“The recent launch of bitcoin futures products on exchanges regulated by the CFTC have reinforced this trend, prompting the adoption of anti-manipulation policies, better market surveillance, and information-sharing agreements between the crypto spot markets and regulated futures exchanges.”
Now, even institutional investors are getting involved. Bair claims that no matter which assets succeed in the long-run, cryptocurrency has already been accepted as a store of value. It is now an asset class, and people are investing.
Close But No Cigar
While it’s great to see some types of interest, not everyone is ready to jump in. Part of investor fear is thanks to the Security and Exchange Commission’s (SEC) failure to list crypto exchange-traded products (ETPs.) In fact, the SEC has recently denied nine different applications to do so.
That said, we still have a chance. Right now, CboeBZX’s application is being considered. This document intends to get SolidX Bitcoin Shares listed by the VanEck SolidX Bitcoin Trust.
“The SEC is right to focus on protecting investors against market manipulation and the security of their crypto assets,” asserts Bair. Yet, she states that it’s impossible to prevent “cyber-attacks” or “attempted manipulations” completely. She thinks that the “proposed ETP” must offer powerful protections equal to other, currently SEC-approved asset classes.
Regardless, the VanEck trust is doing what they can to protect investors. For example, when an investor buys any VanEck shares, the company will purchase an equivalent amount in Bitcoin. Then, it will store these assets in cold storage wallets which require multiple signatures. These wallets will also be backed up across the world in case of an issue.
Standardization Is Key
Even with the VanEck trust fighting for protection, the rest of the market still varies. Yet, because there are so many platforms in which to trade Bitcoin, we can expect less chance of manipulation unlike in markets where we see more of a concentrated trading effort.
Conversely, Bitcoin has such little liquidity, and with few investors owning so much of the market, manipulation might be easier than we think. We need more institutional investors to get involved if we want higher liquidity. Also, more institutional parties would push exchanges to increase their security measures.
Bair ends off by saying the SEC needs a balance. Not only does the group need to protect crypto investors, but they need to ensure crypto protections do not exceed those of other, already established markets. If so, we may see these markets fail at the hands of crypto.
