The WSJ editorial criticizes the SEC’s ‘confusing’ Bitcoin ETF denials

by · July 6, 2022

The Wall Street Journal editorial team has come out and turned against Gary Gensler’s “legendary” opposition to approving a spot Bitcoin exchange-traded fund (ETF).

The hard-hitting opinion piece, published on Wednesday, July 6, called for Gensler-led Securities and Exchange Commission (SEC) for obvious inconsistencies in how the commission handles applications for Bitcoin-related exchange-traded products (ETPs) compared to more traditional ones. assets and other goods.

So far, Gensler’s SEC has rejected every proposal for a spot Bitcoin ETP, including two in the last week from Grayscale and Bitwise, which resulted in Grayscale launching legal action against the SEC.

These consistent rejections led SEC Commissioner Hester Peirce to declare Gensler’s opposition to discovering crypto-ETPs as “becoming legendary”, as the commission has already approved several Bitcoin futures, which have much higher costs and include much greater risk for investors than proposed. detect ETPs.

Peirce also questioned why ETPs have not been approved in the US despite the fact that the products have done so elsewhere.

“At what point, if any, does the growing maturity of the Bitcoin spot markets and the success of similar products elsewhere tip the scale in favor of approval?”

The editors have also drawn attention to a two-part approach used by Gensler that makes it practically impossible to get a spot bitcoin product approved.

This includes requiring ETP sponsors to demonstrate that a significant amount of Bitcoin trading takes place in a regulated market, or that the underlying market must “have a unique resistance to manipulation beyond the protection … of traditional markets.”

According to the WSJ, Gensler is “fully aware” that the first criteria simply cannot be met because almost all Bitcoin trading currently takes place on unregulated crypto exchanges.

The second criterion is also extremely difficult for sponsors to meet as the SEC has “arbitrarily established” a higher standard for spot Bitcoin ETPs without “explaining how to satisfy it.”

Related: The US Department of Commerce has 17 questions to help develop a crypto framework

Eric Balchunas, a senior ETF analyst at Bloomberg, told his 107,000 Twitter followers that it was “nice to see” the WSJ repeat similar thoughts to his ETF analyst colleague James Seyffart – claiming that Gensler “holds innovation hostage” to take control of the crypto. market.

The piece comes a week after Grayscale initiated legal action against the SEC to reject the application to launch a spot Bitcoin ETF – claiming that the SEC’s inconsistent rules regarding spot and futures Bitcoin ETPs are in violation of the law’s requirement that regulators uses “consistent treatment of similar investment vehicles”. “