This year, crypto enthusiasts witnessed the rejection of several cryptocurrency exchange-traded fund (ETF) proposals by the US Securities Exchange Commission. The regulatory body for the capital market based its decisions on security concerns and lack of regulations. The Consensus: Invest 2018 conference, hosted by CoinDesk on November 27, indicated that little has changed in this stance.
Chairman Jay Clayton Wants to See More Market Surveillance
Jay Clayton, Chairman of SEC since May 2017, spoke of the cryptocurrency market and crypto ETF proposals during the conference. The moderator of discussion was investor Glenn Hutchins of Silver Lake Partners. It is important to note that Clayton stated that the opinions are his own, and do not represent an official position of SEC.
He said that the cryptocurrency market needs to have better surveillance before he is “comfortable” with approving an ETF. He stated that, at the moment, crypto exchanges do not have the same monitoring tools as traditional stock exchanges.
What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation, said Clayton during the discussion.
Cryptocurrency Prices Need to Be Free from Manipulation
The SEC Chairman pointed out another issue he sees in the cryptocurrency market: price manipulations. He said that he does not refer to price volatility.
The prices retail investors are seeing are the prices they should rely on, and free from manipulation, Clayton explained.
In his opinion, this is one of the key issues the market needs to solve before considering the approval of a cryptocurrency ETF. However, he is not sure what a specific solution path could be.
And this was certainly not the last concern that Clayton shared at the conference.
Crypto Theft – Still a Serious Issue for the Market
Clayton also talked about the need for improvements concerning custody. Apart from price volatility, investors are also vulnerable to theft.
We’ve seen some thefts around digital assets that make you scratch your head. We care that the assets underlying that ETF have good custody, and that they’re not going to disappear, he said.
Although the crypto market already has a range of custody solutions for digital assets, Clayton believes that these must be “improved and hardened”.
ICOs Should Be Treated as Security
The SEC Chairman also approached the topic of initial coin offerings. His advice for companies financing a venture with a token offering:
You should start with the assumption that you’re starting with a securities offering. The Commission defines an asset as a security if it represents a monetary investment in an enterprise, where the investor expects to make a profit out of other person’s work. This means that ICOs fall under SEC rules and supervision.