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No Bitcoin ETFs Yet

Traders Magazine Online News, December 12, 2018

John D'Antona Jr.

No crypto ETFs.

At least not yet, according to the Securities and Exchange Commission’s Jay Clayton.

In a recent interview on CNBC, SEC Chairman Jay Clayton reiterated the agency’s position that there needs to be more market surveillance, security and solutions for the custody of the nascent asset class.

Up to now, the SEC has denied attempts by issuers and exchanges to bring any type of crypto-backed asset into the marketplace.

"We've seen some thefts around digital assets that make you scratch your head," Clayton was quoted by CNBC as saying at a recent CoinDesk conference. "We care that the assets underlying that ETF have good custody and that they're not going to disappear."

So, the market will have to wait a little longer.

"What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation," Clayton said at the conference. "It's an issue that needs to be addressed before I would be comfortable."

While the US Stock exchanges have surveillance tools and protocols at their disposal to check and offer tools to their constituents to use such as Nasdaq’s SMARTS system or other offered by vendors, there are no such systems in place to track crypto assets.

The New York Stock Exchange and the Nasdaq have what's known as "surveillance," or systems that monitor, prevent and investigate abusive and manipulative activity on the exchanges.

"Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade," Clayton said.

There is also the buy-side’s concerns surrounding custody of holdings and security. Again, in the equities and fixed income markets these questions are already answered.

However, in crypto the picture is murky. It is true that there are dozens of cryptocurrency custody solutions that have either been announced or are already on the market but none that are universally accepted as a standard bearer or from a large enough player that would assuage concerns. Only Fidelity has announced it was launching a separate entity to handle cryptocurrency custody and trade execution for institutional investors but it has yet to launch.

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