The SEC’S “CryptoMom” and exchange-traded fund (“ETF”)

According to the SEC’S Commissioner Hester M. Peirce some people call her “CryptoMom”, and they may be right.

The below is just few highlights from her full speech.

Despite interest from sponsors and investors, the Commission has yet to entertain an exemptive application for an ETF or approve an exchange rule allowing for the operation of crypto ETFs or other ETPs. The Commission has expressed a number of concerns from market manipulation to custody to retail investor protection. We need to do a better job of fostering open dialogue about the first two topics. On the third issue—retail investor protection—the reality is that retail investors will get access to these products, even if we do not allow them to do so through SEC regulated products and venues. Again, it is not the Commission’s role to be the arbiter of what constitutes an appropriate investment or to act as an investment adviser.

In disapproving a proposed rule change to list and trade shares of the Winklevoss Bitcoin Trust, the Commission focused on the underlying characteristics of bitcoin and the spot markets in which it trades. Instead of focusing on the merits of bitcoin as an investment, the Commission should have considered how the exchange-traded wrapper would work and how increased participation by institutional investors in the bitcoin market could have led to bolstered defenses against theft, greater investment in custody solutions, and lower likelihood of market manipulation.

All that said, it is important to remember that, if the SEC were to permit a Cryptocurrency ETP to trade in our markets, it would not be a seal of approval. In other words, investors would still have to do their own homework, study the product disclosures, assess their own appetites for risk, determine how much of a loss they could stomach, and—if those losses materialize—learn from them and refrain from coming to the SEC asking to be made whole.

Well, the above may or clearly justified the nickname “CryptoMom”.

Only time will tell if Cryptocurrencies is a bubble or not, until then we may need to give it the benefits other assets are enjoying.

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