While cryptocurrencies are but a small drop in the pond of global finance, authorities have only increased their scrutiny of this nascent industry over the past couple of months.
The U.S. Securities and Exchange Commission (SEC), especially, has been harsh in keeping this industry kosher, making moves such as denying countless Bitcoin exchange-traded funds, charging the founders of decentralized exchanges, and so on and so forth for breaking securities laws.
Some have accused the SEC of being anti-innovation, though the chairman of the agency recently affirmed that he thinks the stance he is taking is measured and makes sense as per the SEC’s mission.
SEC Approach “Measured, Yet Proactive”
The SEC has long been antagonized by members of the cryptocurrency space.
Case in point, earlier this year, John McAfee, the prominent cybersecurity guru claimed that the SEC has been embarking on an “unlawful quest to regulate the Crypto space,” later asserting that his followers should “flood” the inboxes of those at the agency.
The SEC loses its first legal battle in its unlawful quest to regulate the Crypto space. As I pointed out, they have no lawful right to interfere with us. I can hardly wait for them to tangle with me. We are winning people.https://t.co/tp0JPwLN9z
— John McAfee (@officialmcafee) December 20, 2018
The SEC seems unfazed though. The agency’s chairman, Jay Clayton, said in comments to the Senate Committee on Banking, Housing, and Urban Affairs that he believes the approach that the SEC is taking with digital assets and blockchain is “a measured, yet proactive regulatory approach that both fosters innovation and capital formation while protecting our investors and our markets.”
He went on to say that he is personally optimistic about the prospects of blockchain (and thus cryptocurrency):
“As I have previously stated, I am optimistic that developments in distributed ledger technology can help facilitate capital formation, providing promising investment opportunities for both institutional and Main Street investors.”
Warming Up to Crypto
While the SEC has largely made moves that hurt cryptocurrency companies over the past year, there are some preliminary signs that it is warming up to the cryptocurrency trend, as long as the proper procedure is followed that is.
Earlier this year, the SEC granted a no-action letter to a startup dubbed “Pocketful of Quarters” for its Quarters cryptocurrency, based on Ethereum.
The company is notably run by a 12-year-old and Quarters isn’t exactly your average money-grabbing cryptocurrency project, though this is a step in the right direction.
In October, the gave its latest concrete stance on Bitcoin. In that letter, Cipher Technologies Bitcoin Fund, which was filing a registration to the SEC in hopes of becoming an investment company, argued that Bitcoin was a security.
The SEC begged to differ, with agency staff writing that they believe the leading cryptocurrency doesn’t fit the description of a security as defined by the Howey Test and the SEC’s digital asset framework published in April of this year. I
And most recently, an exchange-traded fund-like investment vehicle was quietly approved by the body.
According to a filing published on and dated Dec. 2, the New York Digital Investment Group (NYDIG) has procured a green light from the SEC to launch the NYDIG Bitcoin Strategy Fund, a portfolio fund in the Stone Ridge Trust Vl.
This fund will invest in cash-settled Bitcoin futures contracts traded on Commodity Futures Trading Commission-approved exchanges, like the CME Group, which has its own BTC futures contract. This means that the fund will never have any direct exposure to the coins on a blockchain when it launches.
According to a research note from Mike McGlone, a commodities strategist at Bloomberg Intelligence, shared by cryptocurrency commentator LightCrypto, the approval of the so-called interval fund from NYDIG improves the “odds of a [fully-fledged] Bitcoin ETF in 2020 to 50-50.” McGlone elaborated, writing:
“Approval shows that lobbying by issuers such as VanEck and Bitwise is starting to pay off.”
Bloomberg Intelligence: SEC's approval of the Stone Ridge interval Bitcoin fund paves the way for a Bitcoin ETF.
Sees odds for approval in 2020 at 50-50. pic.twitter.com/2qZJlvuUNT
— light (@LightCrypto) December 6, 2019
All these things show that the SEC is open to allowing innovation in the cryptocurrency space, and isn’t doing everything in its power to suppress the movement of decentralization as some industry theorists have proposed.