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A commissioner of the U.S. Securities and Exchange Commission (SEC) has voiced her opinion that the agency overstepped its bounds to reject a bitcoin ETF recently based on the underlying asset, bitcoin. She believes that the role of the SEC is to consider the market for the ETF, not the underlying asset itself.
No Jurisdiction to Look at Underlying Assets
Following the SEC’s recent decision to reject the proposed rule change for a bitcoin ETF, SEC Commissioner Hester Peirce voiced her opinion in an interview with Cnbc on Wednesday. She explained that the agency has no jurisdiction to look at the underlying asset when considering whether to approve a proposed rule change for an ETF.
While Peirce voted for the approval, three other commissioners voted against. She explained that her colleagues cited “a number of reasons for that decision, and specifically what I think they did is they looked through to the underlying asset – in this case, that would be bitcoin, and they raised some concerns about the market for that underlying product.” She asserted:
I think by doing that they went beyond what the statute allows us to do and we should have really focused on the market where the exchange-traded product would trade as opposed to focusing on the underlying bitcoin markets.
During the interview, she was asked, “One of their [SEC’s] concerns is that there may be price manipulation in bitcoin, the underlying asset, and what you are saying is that the SEC has no jurisdiction to look at the underlying asset, is that correct?” Peirce replied, “that’s correct.”
She then elaborated that, just like with other underlying assets such as gold or oil, “it’s not within our purview to go and look at how those markets are actually working. We should be focused on the market that’s trading the security which in this case would be the exchange-traded product.”
Rejecting Bitcoin ETF
Regarding the SEC’s recent decision to reject a bitcoin ETF, Peirce noted that her colleagues went through an analysis and concluded that the proposed rule change is not consistent with the Securities Exchange Act. However, Peirce clarified:
I take the position that actually the change that was before us was consistent with the Exchange Act. There’s no reason for us not to allow this product to go ahead and trade on the exchange so I would have let it go forward whereas my colleagues believed that it should not go forward.
Vaneck/Solidx Bitcoin ETF
Currently, the SEC is considering whether to approve the proposed rule change filed by Cboe BZX Exchange to list and trade shares of Solidx Bitcoin Shares issued by the Vaneck Solidx Bitcoin Trust. This proposed rule change was published for comment in the Federal Register on July 2.
Peirce explained that the SEC staff will make a decision on the rule change. They are required to take action within 45 days after the date of the publication in the Federal Register. However, the agency or the exchange can extend the deadline for another 45 days.
Furthermore, the SEC may “institute proceedings to determine whether to disapprove a proposal, in which case the Commission is required to take final action to approve or disapprove a proposed rule change no later than 240 days after the proposal is published in the Federal Register,” the agency wrote:
If the Commission fails to meet any of the deadlines for final action on a proposed rule change, that proposed rule change is, pursuant to the Exchange Act, deemed to have been approved by the Commission.
What do you think of the SEC looking at bitcoin to make its decision on bitcoin ETFs? Let us know in the comments section below.
Images courtesy of Shutterstock, Hester Peirce, and the SEC.
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The post SEC Has No Jurisdiction to Look at Bitcoin for ETF Decision, Admits Commissioner appeared first on Bitcoin News.
Thursday, July 26 might go down as a severe setback for the prospect of bitcoin exchange-traded funds (ETFs). For the second time, the same major trust applying for bitcoin ETF approval was rejected by the United States Securities and Exchange Commission (SEC). SEC Release No. 34-83723, File No. SR-BatsBZX-2016-30 formally denied the Winklevoss Bitcoin Trust ability to list and trade shares. The decision comes amidst high levels of optimism toward bitcoin ETF approval as soon as next month. At least one SEC official does not agree with her colleagues’ decision.
Bitcoin ETF Rejected by SEC, Commissioner Dissents
The SEC published its decision to deny a major bitcoin trust the ability to list and trade shares as an ETF. In a 92 page explanation, the US’s primary regulator of such markets rejected a rule change at the behest of Bats BZX Exchange. The proposed change would have allowed bitcoin tethered investment products.
Bats BZX finds itself in nearly the exact same position as last year, when it was rejected the first time. On appeal, Bats’ petitioning brought with it robust public commenting in hope of changing the agency’s mind.
Perhaps a positive indication for enthusiasts is how the SEC stipulated to not have prejudice necessarily against cryptocurrencies. Their latest decision places blame on the proposal rather than its particular elements. Though it is rejecting the application and rule change, “the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment,” the SEC assured.
They’re kicking back the rule change “because, as discussed in detail below, BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices,” tantalizingly noting how in time, “regulated bitcoin-related markets may continue to grow and develop.”
Not Everyone at the SEC in Agreement on Latest Bitcoin ETF Rejection
ETFs are considered, among cryptosphere cheerleaders for mainstream adoption, something like the holy grail of financial investment products. Exchange traded funds can be listed on legacy boards such as the New York Stock Exchange in much the same way as conventional stocks. The bitcoin variety would likely be a basket of different crypto investments, diversified and relatively low cost like mutual funds. That diversity is believed to be less risky, not to mention saving less crypto savvy investors the trouble of picking which to purchase. And, especially with regard to decentralized digital assets, the complication of holding keys, a wallet, and figuring out custody or storage is all taken care of. Retail investors are very familiar with ETFs.
The SEC expanded on its reasoning, explaining how “existing or newly created bitcoin futures markets may achieve significant size, and an ETP listing exchange may be able to demonstrate in a proposed rule change that it will be able to address the risk of fraud and manipulation by sharing surveillance information with a regulated market of significant size related to bitcoin, as well as, where appropriate, with the spot markets underlying relevant bitcoin derivatives.”
However, not everyone at the SEC was on board with the recent decision to deny bitcoin exchange traded funds. “By precluding approval of cryptocurrency-based ETPs for the foreseeable future, the Commission is engaging in merit regulation,” Commissioner Hester M. Peirce wrote in a published dissent from her colleagues. “Bitcoin is a new phenomenon, and its long-term viability is uncertain. It may succeed; it may fail. The Commission, however, is not well positioned to assess the likelihood of either outcome, for bitcoin or any other asset. Many investors have expressed an interest in gaining exposure to bitcoin, and a subset of these investors would prefer to gain exposure without owning bitcoin directly.”
Echoing sentiment among enthusiasts and crypto investors alike, the Commissioner wrote how such a product “based on bitcoin would offer investors indirect exposure to bitcoin through a product that trades on a regulated securities market and in a manner that eliminates some of the frictions and worries of buying and holding bitcoin directly. If we were to approve the ETP at issue here, investors could choose whether to buy it or avoid it. The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets. Accordingly, I dissent,” Commissioner Peirce stressed.
What do you think this means for the future of ETFs? Let us know in the comments section below.
Images via Pixabay, SEC.
The post Major Bitcoin ETF Rejected by SEC: One Commissioner Disagrees Publicly appeared first on Bitcoin News.
The complaints about two life insurance companies piled up: California customers said Accordia Life & Annuity Co. and Athene Annuity & Life Co. hadn’t sent them billing statements or annual reports and then let their policies lapse.
They said the companies weren’t providing electronic access to…
United States Commodities Futures Trading Commission (CFTC) commissioner, Rostin Behnam recently gave a speech in which he predicted that “virtual currencies […] will become part of the economic practices of any country.” The CFTC commissioner predicted that cryptocurrencies will have a transformative effect in providing financial services to unbanked populations, and undermine corruption through increasing financial transparency.
“Cryptocurrencies Will Proliferate to Every Economy and Every Part of the Planet” – CFTC Commissioner, Rostin Behnam
Whilst speaking at the recent BFI Summit at the United Nations Plaza in New York, CFTC Commissioner, Rostin Behnam, expressed his belief that virtual currencies will be integrated into the economic practices of all nations.
Mr. Behnam stated that “virtual currencies may – will – become part of the economic practices of any country, anywhere. Let me repeat that: these currencies are not going away and they will proliferate to every economy and every part of the planet. Some places, small economies, may become dependent on virtual assets for survival. And, these currencies will be outside traditional monetary intermediaries, like government, banks, investors, ministries, or international organizations.”
“We are Witnessing a Technological Revolution. Perhaps We are Witnessing a Modern Miracle”
Mr. Behnam predicts that virtual currencies will undermine financial corruption, however, he also warns that the “economic […] kleptocracy” exerts excessive influence over the cryptocurrency markets, that virtual currencies could become a vehicle for further capital accumulation for the financial elites.
Mr. Behnam states “One of the often discussed problems in developing countries is corruption. I know it is a perennial problem, undermining the work of the United States and virtually all international organizations. It may be the single greatest impediment to social justice, equality, hunger, peaceful resolution of conflict, and a host of other problems […] Now, with the advent of virtual assets, technology may provide a solution. And, the single greatest weapon against corruption may be the cell phone. There are 6.8 billion cell phones in the world, almost one for every person on the planet. Technology could simply bypass corruption. Here is our chance to put money directly into the hands of those who need it, without bribery, rake-offs, graft, and shakedowns. Virtual currencies could transform the economic and social landscape. It could mean a massive, and equitable, shift of wealth. Technology could be transformational, without a military take-over, civil war, or political or religious creed.”
“However,” he continued, “economic elites know all this. They will not be idle. This is what I mean by a powerful danger. If the kleptocracy controls technology and the means of distribution, then they simply accumulate more wealth at the expense of their citizens, draining wealth in cryptocurrencies rather than dollars or euros. Virtual assets may be a stranglehold. In other words, technology can be a weapon against the work of the United Nations and others trying to alleviate poverty or violence. Virtual assets become a means of deeper control of wealth and a means of exploitation.”
Virtual Currencies Provide Financial Services To Unbanked Populations
The CFTC commissioner discusses the potential for cryptocurrencies to serve as a means through which the vast populations lacking access to basic financial services can attain greater economic autonomy.
“Traditionally, there has been a need for a trusted intermediary – for example, a bank or other financial institution – to serve as a gatekeeper for transactions and many economic activities. Virtual currencies seek to replace the need for a central authority or intermediary with a decentralized, rules-based and open consensus mechanism,” said Mr. Behnam.
“The so-called ‘unbanked’ could now be on the virtual grid. And, those without computers, some four billion people, could gain an important connection through cell phones. And, the discussion has extended to micro-lending, micro-transactions, greater transparency, and greater financial inclusion,” he added.
What are your thoughts regarding Commissioner Behnam’s speech? Join the discussion in the comments section below!
Images courtesy of Shutterstock, Wikipedia
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The person who wins the four-way race to become California’s next insurance commissioner will inherit a job with broad authority over policies that cover homes, businesses, cars and even airplanes.
But medical insurance? Not so much. The commissioner’s direct control over health insurers is limited,…
United States Securities and Exchange Commission (SEC) Commissioner, Hester Peirce, delivered a speech before the Medici Conference earlier this month discussing many issues pertinent to ICOs. Mrs. Peirce indicated that the SEC is open to discussion of developing a regulatory sandbox for ICOs, however, expressed a number of concerns surrounding the legislative model. The commissioner also warned of the potentially stifling effect of applying “blanket” classifications to the emerging field of cryptocurrencies.
SEC Commissioner Welcomes Discussion of Regulatory Sandboxes
Commissioner Peirce opened her speech by stating that “Back in Washington, DC, there has been a lot of talk about regulatory sandboxes,” adding that “A number of forward-looking regulators, both here and abroad, have created regulatory sandboxes.”
Mrs. Peirce cites a number of examples of effective regulatory sandboxes, including the United Kingdom – where the Financial Conduct Authority governs a sandbox that “allows businesses to test innovative products, services, business models and delivery mechanisms in the real market, with real consumers,” and Singapore – where the Monetary Authority of Singapore uses regulatory sandbox apparatus to “encourage[e] more Fintech experimentation so that promising innovations can be tested in the market and have a chance for wider adoption, in Singapore and abroad.”
“The motivating notion behind a regulatory sandbox,” Mrs. Peirce asserts, “is that the regulator in a sense sits in the sandbox with the innovator. Not only is she right there to make sure that nobody gets hurt, but she has a front-row seat on the innovative process. She sits at the entrepreneur’s shoulder as he thinks through how to address structural and aesthetic weaknesses in his sandcastle.”
“Talk of sandboxes is welcome, and my fellow regulators’ sandboxes have already yielded great dividends,” Mrs. Peirce added.
Concerns Surrounding Regulatory Sandbox Approach
Despite expressing her openness to discussion surrounding regulatory sandboxes, the commissioner outlined a number of qualms held regarding the legislative model.
Mrs. Peirce states that “The regulator may insert itself inappropriately into the creative process,” stressing that “The regulator should be careful not to try to control the development of new technologies. Not only is it outside the regulator’s proper function, but such micromanagement can result in the regulator forcing new technology to fit existing—and familiar—regulatory frameworks regardless of whether those frameworks are appropriate.”
“The law deserves respect, but technological progress should not be bound by the limits of the regulator’s lawyerly imagination,” added Mrs. Peirce.
Commissioner Peirce also outlined concerns that regulatory sandboxes create “the temptation […] for regulators […] to substitute their own judgement for that of consumer and investors,” emphasizing that “Regulators do not need to take on the impossible task of deciding what products and services will win over consumers. The market is efficient at signaling which products and services people want in their lives and which they would rather do without.”
Regulation as Instrumental in Defining the Future Direction of Innovative Technology
Mrs. Peirce stated that “The world of tokens and ICOs is still in its infancy,” emphasizing that “Determining the appropriate regulatory regime also will mean determining the shape these transactions will take as they mature.
The commissioner added that “While it’s tempting to envision what might come to pass if these concepts were free to develop in whatever way the market dictated, without being pinned down with a label […] there comes a point where regulatory uncertainty is a greater roadblock than confinement within a particular regulatory regime.”
Commissioner Peirce “Wary of any Blanket Designation for all ICOs”
Mrs. Peirce expressed caution regarding regulators seeking to hastily create a broad label for the dynamic and still emerging ICO sector.
After arguing that the majority of “tokens or coins used in initial coin offerings […] look the most like securities,” the commissioner stresses “This is not to say that all ICOs must be deemed securities offerings. Given the undeveloped nature of this area, I am wary of any blanket designation for all ICOs. Instead, the best path forward, at least for the time being, is to evaluate the facts and circumstances of each offering.”
Commissioner Peirce also implied that the SEC will develop a unique apparatus of ICOs deemed to fall under the regulator’s purview, stating “For those ICOs and tokens that do come under the SEC’s jurisdiction, it will fall to us to devise an appropriate regulatory structure for these new types of deals.“
The Regulatory Challenge of Innovation
Mrs. Peirce stated that “Innovation is always a challenge for regulators. We are used to the way things have been done. Our rules have grown up in response to past technologies. Figuring out whether and how they apply to new ideas is difficult.”
Commissioner Peirce also warned that regulators “must be careful not to let our lack of familiarity with new technology breed anxiety and therefore bad regulation,” adding that “There is a risk, when something truly innovative comes along, that regulators will focus only on the harms the innovation may bring and miss entirely the opportunity it presents to improve people’s lives.”
At the speech’s conclusion, Mrs. Peirce stated that “The best path forward is for regulators to approach ICOs and tokens with intense curiosity. We must put in the effort to learn about these new technologies and employ the staff necessary to support our understanding.”
“My hope is that we can navigate these new waters collaboratively. The SEC’s role is not to hand out permission slips for innovation. Innovation happens—organically through private decisions and irrepressible human creativity. We at the Commission have a role to play in protecting investors and market integrity by deterring and punishing fraud and setting clear rules. As we sit atop our lifeguard’s stand and survey the beach, however, let’s not lose sight of the benefits new technology can provide in the area of capital formation, market efficiency, economic growth, and overall societal well-being.”
Do you think that a regulatory sandbox for ICOs is a good idea? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, sec.gov
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George P. Bush, Texas’ land commissioner, won the state’s GOP primary on Tuesday, getting the outright majority of votes against a challenger from a former office holder and avoiding a runoff election.
Some members of the European Union have been discussing the popularity of the decentralized currency bitcoin, and the EU’s political body recently added “digital currencies” to its anti-money laundering statutes. However, the EU commissioner for financial affairs, Pierre Moscovici, explains in a recent interview that at this stage politicians have no plans to “react” just yet to the bitcoin phenomenon.
The EU Adds Digital Currency Definitions to Existing Legislation, But the Financial Commissioner Says the Political Body Has No Current Plans to Regulate Bitcoin
Bitcoin is trending worldwide, and regulators and bureaucrats from individual countries are discussing the subject quite heavily. Political bodies from the U.S., Asia, and EU have been talking about the many ways they can regulate the cryptocurrency by clamping down on bitcoin businesses and exchanges. Politicians from the EU particularly have been concerned with terrorism financing, money laundering, and tax evasion that they believe can be tied to cryptocurrencies. News.Bitcoin.com recently reported on European legislators adding digital currencies to the Fourth Anti-Money Laundering Directive which basically considers currencies like bitcoin to be a “monetary instrument.”
Although spectators believe the EU is “cracking down” on cryptocurrencies the European Union commissioner, Pierre Moscovici says the political body has no plans to regulate them at the moment.
EU Commissioner: “We Don’t Think We Have to React to Bitcoin at This Stage”
In an interview on the broadcast ‘Bloomberg Surveillance,’ with Francine Lacqua, the EU’s financial commissioner, Pierre Moscovici, is explicitly asked about bitcoin and regulating the digital asset.
“Commissioner are you looking at bitcoin at all and does the is the EU planning to take any action to regulate it?” Lacqua asks the EU’s financial affairs commissioner.
“At this stage, we do not consider bitcoin as an alternative currency, not like the euro — We see that there is quite a lot of speculation about that [bitcoin],” Moscovici responds.
Sometimes speculation is overactive or exuberant — We look at that and analyzed the phenomenon, but we don’t think we have to react to bitcoin at this stage as a political and technical body.
Regulatory Conversations for Bitcoin Are Not Happening Right Now
The latest definitions added to the EU’s Fourth Anti-Money Laundering Directive include digital currencies and prepaid debit cards which is not much different than the legislation being drafted across many states in the U.S. So Lacqua asks the EU commissioner if politicians and regulators from the region are even “talking about regulating bitcoin.” Moscovici details to the host that regulatory discussions are not so prevalent right now.
“No we are not having those conversations right now,” Moscovici emphasizes.
What do you think about the EU financial commissioner’s statements? Let us know what you think in the comments below.
Images via Shutterstock, and Pixabay.
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In a surprise move, Bill Bratton is expected to step down as New York City’s police commissioner Tuesday, city officials tell ABC News . Bratton had previously been expected to remain in his post through the mayoral election next year. James O’Neill, the current chief of the department, is expected to…