The United States Securities and Exchange Commission (SEC) recently gave its approval for the trading of spot Bitcoin exchange-traded funds (ETFs), bringing an end to a prolonged and consequential regulatory process. Hester Pierce, an SEC Commissioner recognized as “Crypto Mom” for her pro-crypto stance, expressed her perspective on the matter, deeming the entire saga unnecessary but impactful.
SEC Commissioner details SEC’s previous stance
The SEC Commissioner highlighted that the first application for a spot Bitcoin ETF was submitted over a decade ago, emphasizing the perplexing nature of the SEC’s repeated denials. The commissioner argued that the SEC’s review process for these filings differed significantly from conventional processes for approving comparable exchange-traded products (ETPs), predicting approval timelines impossible. She asserted that the goalposts continually shifted, leading to a prolonged series of denials.
The SEC’s lack of prior action drew criticism from Pierce, who noted that retail investors turned to less efficient means for gaining Bitcoin exposure in the securities markets due to the delays. She criticized the SEC’s weak explanation for the change in stance and lamented the missed opportunities over the past decade. Pierce argued that applying the standard used for other commodity-based ETPs could have led to approval much earlier. The SEC’s decision to approve spot Bitcoin ETFs followed a court ruling in August, directing the agency to review an application by Grayscale to convert its Bitcoin Trust into a true ETF.
The court highlighted the absence of a coherent explanation for denying spot Bitcoin ETFs, deeming such denials potentially unlawful. SEC Chair Gary Gensler acknowledged the court ruling, stating that the circumstances had changed, justifying the approval of spot Bitcoin ETP shares. Despite the approval, Pierce contended that the order did not undo the harms caused by the SEC’s disparate treatment of spot Bitcoin products over the years. The SEC Commissioner outlined the negative consequences of the SEC’s anti-crypto approach, emphasizing the harm to the agency’s reputation beyond the crypto sphere.
Implications of the approval and the journey ahead
The SEC Commissioner argued that diminished trust from the public could hinder the SEC’s ability to regulate markets effectively. Pierce also criticized the waste of resources, estimating that millions of dollars of staff time had been spent blocking these applications. The commissioner lamented that the SEC’s actions had muddled people’s understanding of its role, emphasizing that Congress did not authorize the SEC to dictate whether a particular investment is suitable for individuals. She contended that administrative procedures were misused to withhold investments disliked by the SEC from the public.
Pierce further criticized the SEC’s creation of an artificial frenzy around Bitcoin ETFs, suggesting that following its own rules could have prevented the circus atmosphere. The SEC Commissioner argued that the SEC’s actions had alienated a generation of product innovators in the crypto space and highlighted the costly legal battle that eventually led to the approval of spot Bitcoin ETFs. While reflecting on the situation, Pierce called for celebration not of Bitcoin itself but of the right of American investors to express their thoughts on Bitcoin by trading spot Bitcoin ETPs.
She commended the perseverance of market participants in bringing to market a product they believed investors wanted, acknowledging the applicants’ decade-long persistence despite the Commission’s obstruction. The approval of spot Bitcoin ETFs by the SEC, after a prolonged and convoluted process, marks a significant development in the intersection of cryptocurrency and traditional financial markets. Commissioner Pierce’s critique sheds light on the challenges faced during this journey and emphasizes the need for regulatory clarity and consistency in the evolving crypto landscape.
