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While the entire cryptocurrency market is waiting anxiously for a Bitcoin ETF, the Securities and Exchange Commission does not look to be in a hurry to approve the product. Recently, SEC chair Jay Clayton said that he wants to see more changes in the crypto markets before being comfortable with the idea of a Bitcoin ETF. Some of his key issues in the industry include market surveillance and custodial services. His comments point to the fact that the crypto space may need to mature further.
How Will SEC Be ‘Comfortable’ With a Bitcoin ETF?
Jay Clayton has some concerns about the crypto markets that could lead to a denial or delay of a Bitcoin ETF. First is the lack of market surveillance. Cryptocurrency exchanges do not have the same monitoring tools as traditional Securities exchanges do. Therefore, investors may not get a fair assessment of a coin’s price.
He said:
“It’s an issue that needs to be addressed before I would be comfortable.”
Talking about the NYSE and NASDAQ, he noted that the two exchanges have “surveillance” which reduces the risk of manipulative and abusive practices. He added:
“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade.”
Better Custodial Services in the Crypto Space
One of the biggest roadblocks in crypto adoption and its subsequent entry into the ETF space is the lack of custody services. ETFs track assets and there has to be a solution to store these assets. The price of Bitcoin is very volatile, and the crypto industry is not new to thefts. Clayton said:
“We’ve seen some thefts around digital assets that make you scratch your head. We care that the assets underlying that ETF has good custody and that they’re not going to disappear.”
It is interesting to note that Fidelity, one of the largest asset managers in the world is jumping into the crypto space. It is establishing a new company that will provide crypto custody services as well. Prominent exchanges like Coinbase and Gemini are also exploring similar solutions at the moment.
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