US SEC Regulatory Decision To Bet On BTC-Linked Spot ETF Futures

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bitcoin etf sec decision

There is a lot of uncertainty surrounding the prospect of Bitcoin ETFs. The SEC has repeatedly delayed its decision, with many speculating as to why it would be hesitant to allow these funds in an already volatile market. Some believe that the SEC may want more time for them to study digital currencies and assess their possible impact on traditional markets before approving such fund, while others think they are waiting for Congress or another regulatory body like FINRA—the Financial Industry Regulatory Authority—to create appropriate guidelines first.

A change in the definition of exchange by the Securities and Exchange Commission (SEC) could have a direct impact on Bitcoin, cryptocurrencies, and decentralized finance (DeFi).

BTC spot ETF proponents will benefit the most from this potential chance, according to Bloomberg’s ETF experts James Seyffart and Eric Balchunas. In 2021, the U.S. Commission approved a Bitcoin-linked futures ETF for the first time ever.

 While the crypto industry celebrated this, experts such as Balchunas, Seyffart, and others criticized this investment product for its inefficiency.

Consumers, they argued, would benefit more from a spot BTC ETF. However, the Commission said BTC futures ETFs give them more “protection”.

Despite this, investment firms have still filed for a BTC spot ETF. The SEC has denied these petitions, considering that the product would lack the regulatory framework to prevent harm to consumers.

According to Seyffart via his Twitter account, the exchange expansion could alter the status quo. If enacted, the rule change proposal would likely lead to the creation of a bitcoin ETF.

Although this policy change doesn’t affect cryptocurrencies or the crypto industry, crypto exchanges and DeFi platforms are likely to be forced to register with the SEC because of it.  Consequently, Seyffart and Balchunas are not confident the Commission will be able to continue to deny a Bitcoin spot ETF.

The expert described the change in the definition of exchange as a possibility that could take place during Q4 of 2022 or Q2 of 2023. Although good news for institutional investors who wish to invest in Bitcoin, the new definition could be a first step in classifying all DeFi assets as securities: Exchanges and alternative trading systems (ATS) are defined more broadly.Several cryptos will also be deemed securities. Therefore, some of these crypto exchanges will have to register as ATSs in order to continue operating.

More Uncertainty for DeFIi

DeFi Education Fund has issued a separate report calling on the community to address this potential issue. In their Twitter posts, this organization instructed DeFi users to demand “clarification” from the U.S. regulator.

Although the organization does not mention cryptocurrencies or DeFi, it believes there are “danger signs”.

In a nutshell, the proposed rule would potentially require any organization/association/group of people that “makes available” a “communication protocol system” (CPS) to comply with financial regulations designed for exchanges like NYSE if a CPS allows people to interact & agree to terms of a trade.

The DeFi Education Fund decided to demand clarification since the definition of a communication protocol system (CPS) is unclear.

DeFi users can contact the SEC by email until April 18th, 2022, by accessing this link. The DeFi Education Fund aims to prevent the SEC from creating “more uncertainty for DeFi”.

It is more likely that the SEC will consider changes if more people request clarification.

In response to this potential definition change, SEC Commissioner Hester Peirce has commented. Peirce believes this amendment is “far beyond the scope of the concept release” and could have a significant impact.

Decentralized protocols, such as Uniswap, SushiSwap, and Aave, run on Ethereum and other blockchains.

Using smart contracts, however, means developers and users may encounter new obstacles due to this amendment.

Via this site.