The SEC has become increasingly active in crypto in the past few months. Most recently with the announced settlements involving the founder of the EtherDelta exchange and the prolonged decisions on the ETF.

While the market has reacted with surprise to these actions, many of the cases or at least the approaches have been undoubtedly confusing for regulators.

For instance, the Commodity Futures Trading Commission (CFTC) treats crypto as commodities, the Securities and Exchange Commission (SEC) insists they are securities, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) applies currency rules, and the Internal Revenue Service treats digital money as property.

Financial regulators and lawmakers are taking time to figure out ways to better handle the realm of digital assets, many federal agencies that are not concerned with monetary matters are exploring the uses of blockchain technology to aid their day-to-day operations.

On the latest, The new announcement by the SEC states that the decision regarding the potential approval for a Bitcoin ETF is once again postponed. This time, the SEC declared that the decision will be made by February 27th, 2019.

The VanEck/SolidX Bitcoin Trust ETF was first submitted for SEC approval earlier this summer. The exchange-traded fund would hold real, physical bitcoin and cater to institutional investors. Some believe it has the best chance of being the world’s first bitcoin ETF.

While the SEC has denied every other bitcoin ETF that has come across its desk, some believe this ETF is different.

Jake Chervinsky @jchervinsky a lawyer focused on consulting for blockchain businesses, took on twitter to explain his point of view on the subject.

                   

In simple terms, the SEC is basically stating the main reason for delaying is to give the space a chance to confront manipulation thru the exchanges abroad, which in turn they have no control on how exchanges are going to approach the situation providing a far less chance of getting approved. Stating a 10% chance of approval at current times.

In response to the SEC’s grounds for disapproval, both CBOE and SolidX filed comments explaining why the ETF satisfies Exchange Act § 6(b)(5), in addition to rebutting the SEC’s other concerns.

Hester Peirce, dubbed “Crypto Mom” by the community for her dissent with the SEC’s decision to reject a Bitcoin ETF proposed by Cameron and Tyler Winklevoss, said that a crypto or Bitcoin ETF is “definitely possible,” but it could be years away:

“Definitely possible could be 20 years from now, or it could be tomorrow. Don’t hold your breath. The SEC took a long time to [establish] Finhub. It might take even longer to approve an exchange-traded product,” — Hester Peirce, commissioner of the United States Securities and Exchange Commission (SEC), speaking about Bitcoin ETF approval.

The SEC is right to focus on protecting investors against market manipulation and the security of their crypto assets. These are core to the SEC’s mission. However, there is not an asset class on the planet where absolute guarantees can be made against attempted manipulations.

The strength of market surveillance and anti-manipulation policies varies widely across the many crypto trading markets, in different areas of the world and this is a cause for concern. On the plus side, the large number of venues in which bitcoin trades arguably makes it less susceptible to manipulation than spot markets for other assets where trading is more concentrated.

Active arbitrage between the OTC and spot exchanges should also reduce manipulation risk. But on the negative side, the bitcoin spot market’s thin liquidity and domination by individual investors increase manipulation risk.

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.

As crypto trading has survived and matured, we now we see institutional investor interest picking up.

The SEC has a difficult task in ensuring appropriate investor protections and hopefully regulating without setting impossibly high standards.

Given the current market situation and stage of the cycle from a technical perspective. We believe the ETF will not be approved. Fundamentally it will be devastating for Bitcoin.

Prepare for the worst but hope for the best.

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