- Gary Gensler has dealt a blow to Bitcoin bulls by obliquely criticizing the current Bitcoin ETF proposals
- Gensler spoke out against the “limited risk monitoring” offered by crypto exchanges
- Such monitoring is crucial to a Bitcoin ETF being awarded
Securities and Exchange Commission (SEC) Chair Gary Gensler has criticized the “limited risk monitoring” that cryptocurrency exchanges employ, dealing a potential blow to those who believe a Bitcoin ETF is imminent this year. Gensler was taking part in a webinar when the subject of Coinbase being used as the focal point for all the recent Bitcoin ETF applications came up, at which point he discussed the various issues that he still personally sees with crypto exchanges when it comes to preventing market manipulation. This has been a long-term concern of the SEC when it comes to a Bitcoin ETF and could spell trouble for the likes of BlackRock and Fidelity.
Surveillance the Key for SEC
The SEC has said for over a year that its chief concern with a Bitcoin ETF is adequate surveillance sharing and the fact Coinbase has accused the SEC (rightly) of trying to crush the entire crypto space instead of nurturing it suggests that the agency isn’t going to take the fact that Coinbase is the primary facilitator of all the recent spot Bitcoin ETF applications too well.
When asked specifically about Coinbase’s role as a Bitcoin ETF facilitator, Gensler decline to comment on it specifically but did cite his concerns that crypto exchanges in general tend to operate “a bunch of conflicted services,” which he said means that “they culd be trading directly against you and market making against you which you would not see, or hope to see, on the New York Stock Exchange or NASDAQ.”
Gensler added that, crucially, crypto exchanges have “limited risk monitoring” for wash trading, which is the SEC’s biggest bugbear, suggesting that its concerns have not exactly been eased in the years since it rejected its first such ETF in 2015.
Bloomberg Accentuates the Negative
The news led to analysts leaning slightly more bearish, with Bloomberg analyst Eric Balchunas sounding the warning trumpet, although he did suggest that the issue may be in hand:
Once again tho, Nasdaq and BlackRock both knew he had these kinds of problems w exch. Very poss they working with Coinbase to address all this, which means the SEC using ETF approval as leverage to clean all this up (which is largely our theory on why approval IS very poss).
— Eric Balchunas (@EricBalchunas) July 12, 2023
Fellow analyst James Seyffart, who in May gave Grayscale a 70% chance of success in its bid to convert the Grayscale Trust to a Bitcoin ETF, also pitched it neutral to negative:
To us, this is a sign that he might be laying groundwork for potential denial reasonings. Some more goalpost moving maybe… Thats part of reason we aren’t higher than 50/50. Always has been the case that SEC will back into whatever they decide to do IMO https://t.co/uI7iD0Wxcg
— James Seyffart (@JSeyff) July 12, 2023
Bitcoin bulls will be hopeful that the likes of BlackRock and Fidelity have a trick or two up their sleeve or we could see some red on the charts before more green.
