How do we make crypto a household name? Wrap it in a regulated gift box to make it appear safer to unwrap. That is, get the government to approve it as ETFs.
Exchange traded funds (ETFs) are marketable securities used in tracking indices and commodities that represent a proportionate amount of the particular fund’s shares.
As of yet, the U.S. Securities and Exchange Commission (SEC) has not gone ahead with an approval for a cryptocurrency-based ETF.
Most recently, the SEC has rejected 9 Bitcoin-based ETFs. The ETFs filed by ProShares and GraniteShares as well as five others filed by Direxion were rejected by the commission this past week.
Cause for Concern
The SEC’s underlying rationale for these rejections rests on the cryptocurrency market’s susceptibility to manipulation as well as the limited nature of its size with regard to a regulated market.
Anyone can develop a blockchain code or use the Bitcoin- or Ethereum-based algorithm to create a digital currency without any license or regulatory procedure. This causes concerns of scams being used to “pump and dump” the market for profit or to take investor money and run. However, the highly participatory and unregulated ease of cryptocurrency is what makes it uniquely revolutionary toward a new decentralized economy.
Right now, the lion’s share of cryptocurrency’s volume is owned by only a few individuals, making it particularly vulnerable. More than 40% of cryptocurrency volume is owned by only a thousand people. Making crypto mainstream would put more coins in more hands allowing for a more stable currency and concept. An ETF approval by the SEC would be a major step in this direction.
A Different Kind of Market
Though the ETF proposals filed thus far have been put forward by legitimate companies, cryptocurrency itself remains unregulated and its value based on coin holdings. It therefore is difficult for the SEC to track and commodify shares that represent a coin’s true value.
Ultimately, these decisions reflect what the SEC believes to be the failure of the cryptocurrency market, which is to comply with the Exchange Act “in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
These rejections amount to what can be considered a resounding disapproval from the SEC of the crypto market, putting a significant damper on these and other companies’ efforts to further grow and expand into the majority of the population.
The Future of Cryptocurrency
The fight to bring crypto into mainstream trading and investing, as well as its commercial use, isn’t over as the SEC promises to review the 9 rejected Bitcoin ETFs shorty. The question remains: how will an unregulated system survive in a regulated environment? And, if cryptocurrency does maintain its decentralized manner, allowing it to remain autonomous and anonymous while protecting users against fraud, we will see a blast of adaptation and profitability.