Non-profit organization Better Markets, known for its advocacy for rigorous financial regulations, has recently submitted a letter to the Securities and Exchange Commission (SEC). The communication urges the SEC to reject several applications for exchange-traded funds (ETFs) that would trade Bitcoin, a development highly anticipated by cryptocurrency enthusiasts.
Claims of Potential Harm to Investors
Dennis M. Kelleher, CEO and co-founder of Better Markets, contends in his letter that the SEC’s approval of a spot Bitcoin ETF could pose a significant risk to investors. He warns of the introduction of a “…speculative, volatile, and socially useless financial product” to a vast number of American investors and retirees. Kelleher expresses concern that the approval of such an ETF could set a worrying precedent, making it difficult for the SEC to prevail in future legal disputes and sparking a wave of crypto industry “propaganda” aimed at encouraging numerous retirement savers to diversify their portfolios into cryptocurrency.
Spot Bitcoin ETFs Regulatory Concerns
In his letter, Kelleher raises several specific spot Bitcoin ETFs regulatory concerns. He questions whether the Bitcoin market is mature enough to justify an ETF, highlighting the potential for wash trading and the high concentration of Bitcoin ownership among a few entities. Kelleher further contends that the risk of fraud in the spot Bitcoin market is so high that an exchange’s rules could not allow the listing and trading of a spot Bitcoin ETP (exchange-traded product) without compromising the requirement to prevent fraud and manipulation and protect investors and the public interest.
Moreover, Kelleher appears to argue that Bitcoin’s volatility alone should disqualify it from being offered to investors. He notes that a simple chart showing prolonged periods of flat Bitcoin prices interspersed with wild fluctuations indicates that a spot Bitcoin ETP poses risks to the public that are inconsistent with the obligation to protect investors and the public interest.
Advocacy for Stricter Financial Regulation
Better Markets, a non-partisan non-profit organization, campaigns for heightened financial regulation on Wall Street. The organization has been unyielding in its criticism of cryptocurrency, repeatedly urging lawmakers and regulators to halt the expansion of crypto’s regulatory acceptance. Despite its criticism of cryptocurrencies, the organization has attracted attention from crypto firm FTX, which once proposed a $1 million donation to support its application for approval to the CFTC. Kelleher emphatically rejected the donation, labeling it as a “direct quid pro quo,” and called on the CFTC to reject the application.
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While the potential approval of spot Bitcoin ETFs is seen by Kelleher and Better Markets as “a regulatory mistake of historic proportions,” it remains to be seen how the SEC will respond to these concerns. Whatever the outcome, it’s clear that the debate around cryptocurrency regulation continues to be a hot topic in the financial world.
