Bitcoin ETF approval won’t happen any time soon

On Aug 13, 2023

John Reed Stark, founder and chief of the Office of Internet Enforcement at the U.S. Securities and Exchange Commission (SEC), claims the agency will only approve Bitcoin spot ETF after 2024.

Stark weighed in on the current regulatory environment in a lengthy post on X, formerly known as Twitter:

Will the SEC Approve Any Of The Recent Bitcoin Spot ETF Applications?
People often ask for my opinion on whether the SEC will approve any of the recent spate of bitcoin spot ETF applications, which is an interesting and important question.
My take is that the current SEC will… pic.twitter.com/lPXebl03Y4
— John Reed Stark (@JohnReedStark) August 13, 2023

In the post, Stark cited a letter to the SEC from Better Markets highlighting problems with the current setup for spot BTC ETFs. According to the financial watchdog, the Bitcoin ETF sector has a history of “artificially inflated” trading volumes caused by runaway incidents of wash trading and price manipulation.

Better Markets also pointed out that the spot Bitcoin market was highly concentrated and relied on a small group maintaining the network.

In Stark’s opinion, the issues highlighted in the non-profit organization’s letter to the SEC created significant weaknesses in the proposed Bitcoin-based ETFs that bad actors could manipulate.

Therefore, Stark, who runs a cybersecurity consultancy firm, believes it is farfetched to imagine the regulator will approve spot Bitcoin ETFs.

The ex-SEC official also claims that crypto regulation has become more partisan, with the current SEC office heavily skewed toward Democrats. However, the agency’s stance could change significantly after Election Day, implying that a Republican president may bring about more favorable conditions for cryptocurrency, he suggests.

Hester Pierce for SEC chair?

Interestingly, the SEC started coming down heavily on the crypto industry during the tenure of Jay Clayton, a Republican appointee of former President Donald Trump. Clayton, who issued 57 enforcement actions against the crypto industry in his time, is on record advising his successor Gary Gensler to approve spot Bitcoin ETFs.

Suppose the Republicans win the presidency in 2024, Stark expects two scenarios to play out: the new administration will drastically reduce crypto enforcement actions for registration breaches and instead focus on fraud, and it will also be more open to crypto investment instruments like Bitcoin ETFs.

The prolific author also foresees commissioner Hester Pierce, popularly known as ”Crypto Mom,” taking over from Gensler as the new SEC chair. If that were to happen, Stark believes most of the agency’s crypto-related enforcement actions would stop, given Pierce’s record of opposition.

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