Bitcoin Spot ETF Launches Amid Regulatory Hurdles and SEC Chairman's Opposition
Summary:
The Bitcoin spot ETF is the first investment product offering direct exposure to Bitcoin's price through traditional, regulated resources. However, while it was approved after a long lawsuit accused the SEC of hypocrisy, SEC chairman Gary Gensler voiced his objection. Furthermore, before recommending the Bitcoin spot ETF to clients, advisors and brokers must comply with the SEC's 2019 Regulation Best Interest (Reg BI). The regulation, however, is vague, potentially allowing investors to sue advisors upon disappointing investment returns. Lastly, native Bitcoiners are unlikely to be deterred by these complications despite potential delays for baby boomers looking to diversify their portfolios.
The first-ever investment medium granting investors access to Bitcoin's (BTC) price through standard and regulated investment options is the Bitcoin spot ETF. This is the inaugural Bitcoin-linked investment facility that the older generation can readily identify with and confidently invest in. It was authorized after a protracted trial resulted in the D.C. Circuit Court determining that the SEC's endorsement of Bitcoin futures ETFs but not spot ETFs was contradictory. Following the vote, SEC Chairman Gary Gensler expressed reluctance in casting his vote in favor of the ETFs.
This marked the initial occasion an SEC chairman sanctioned an ETF, accompanied by a warning against purchasing said ETF. This contradicts the SEC's commitment to transparency.
Did the Bitcoin community come out on top? Have they decisively triumphed over Gary? That's debatable. As a Star War analogy, we're still in the second movie, Empire Strikes Back. Despite Gensler's ongoing construction of a second Death Star, the Bitcoin revolution's prospects as a currency and store of value remain intact.
Investment advisers and brokers recommending their clients purchase shares of the Bitcoin spot ETF must adhere to new regulations set in place by the SEC in 2019, known as the Regulation Best Interest (Reg BI).
Reg BI is a convoluted regulation introduced by the SEC, comprising hundreds of pages, requiring advisers to adhere to a duty of care and specific disclosure necessities. A duty of care may appear favorable, its definition is ambiguous in Reg Bi, which welcomes investors to file suits against their advisers based on after-the-fact bias if their investment doesn't meet their expectations.
The position of a politically-driven SEC chairman, inclined to uphold the sentiments of Elizabeth Warren, the single anti-Bitcoin Senator who influenced President Biden to nominate her as a trade-off for her withdrawing from the democratic presidential primary, might encourage the exploitation of Reg Bi's vague judgments, discouraging those advisers and brokers dominated by Reg Bi from advising clients to invest in the new Bitcoin spot ETFs.
This is not a hypothetical scenario, it's more likely a prophecy. Vanguard has already forbidden clients from investing in Bitcoin ETFs products featured on Fidelity and almost all other brokerage platforms. This is due to the prediction that the ambiguity of Reg BI will discourage investments in this platform, which the SEC was compelled by federal courts to launch.
Gensler's response will most likely involve the evaluation of investment advisers and brokers by SEC investigators, and the risk of SEC law enforcement staff intervention. Gensler's Senate backer, Senator Elizabeth Warren, promotes this anti-Bitcoin sentiment through the weapon of bureaucracy.
Though this may deter some short-term tactics by Gensler, whose term as SEC chairman has ended, it is unlikely to discourage native Bitcoiners, who consider the notion of an ETF wrapper around Bitcoin to be trivial. It will merely hinder the baby boomers wishing to diversify their portfolios because of Gensler.
This is a general information piece and must not be considered as legal or investment advice. The provided views and perspectives are solely the author's and do not reflect or represent Cointelegraph's views or opinions.
Published At
1/19/2024 1:56:33 AM
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