Dennis Kelleher, the CEO of the nonprofit organization Better Markets, has penned a letter to the United States Securities and Exchange Commission (SEC) advising against approving a spot Bitcoin exchange-traded fund (ETF). Kelleher argues that such an approval would deviate from the SEC’s established principles and potentially lead to massive harm for investors.
Better Markets expressed appreciation for the chance to comment on proposed rule changes from the Cboe BZX Exchange, Inc., and The NASDAQ Stock Market, LLC, seeking approval for spot Bitcoin-based exchange-traded products (ETPs). Kelleher’s letter contends that approving these rule changes would be a “grave if not historic mistake,” emphasizing the detrimental impact on investors.
The CEO referenced the D.C. Circuit’s decision in Grayscale Investments, LLC, v. SEC, suggesting that this should not alter the SEC’s previous decisions to disapprove multiple spot Bitcoin-based ETPs from various exchanges. Kelleher underscored the potential threat to investors, characterizing the approval of such products as a “historic mistake” that could expose millions of Americans to speculative and volatile financial instruments.
Critical Risks In Spot Bitcoin Trading
Furthermore, the letter cautioned against creating a perception that the SEC’s approval legitimizes the entire crypto industry. Kelleher argued that approving spot Bitcoin-based ETPs could set a dangerous precedent, making it harder for the SEC to protect the public interest in various contexts.
The Grayscale Decision was dissected, with Kelleher asserting that the SEC need not approve spot Bitcoin ETPs merely because it approved Bitcoin futures ETPs. He highlighted the fundamental differences between the two, emphasizing the risks associated with spot Bitcoin trading, such as fraudulent activities and market manipulation.
The letter addressed the issue of wash trading, a prevalent form of market manipulation in the crypto industry, suggesting that the spot Bitcoin market’s susceptibility to fraud and manipulation poses a significant threat to investors. Kelleher cited a recent SEC complaint against Binance.US, alleging wash trading to inflate trading volumes.
Additionally, concerns were raised about the highly concentrated ownership of BTC, contrary to claims of decentralization in the crypto industry. Kelleher argued that this concentration poses serious risks to investors and contradicts rules designed to protect the public interest.
Related Reading | Coinbase Charts European Expansion: Eyes MiFID License For Derivatives Boost