If you’ve never had a friendly sparring match with the Securities and Exchange Commission, you can be forgiven for underestimating them. But I’ve worked with regulators on more than 80 exchange-related products over 14 years — so I’ve learned not to.
Back in 2006, when I worked for Barclays, some colleagues and I sought and obtained a no-action letter from the SEC to allow us to list and trade the first exchange-traded note (ETN). We then launched the iPath platform, creating over 30 innovative products including DJP and VXX. In 2009, I co-founded and served as CEO for VelocityShares, which was acquired by Janus in 2014. I have also served as head of exchange-traded products at Credit Suisse and as head of product development at Global X Funds. As founder and CEO of REX Shares, my firm was among the first to file with the SEC for Bitcoin-related ETFs in 2017.
So when it comes to a Bitcoin ETF getting approved, here is what I can tell you: The SEC doesn’t really care about where you worked or how you dress.
Bill Barhydt, chief executive of Bitcoin payment startup Abra, recently told CNBC that he thought the SEC was denying ETF applications because the people filing those applications “don’t fit the mold of who the SEC is used to approving,” while mentioning that he previously worked at Goldman Sachs.
Don’t believe that for a nanosecond. It’s an easy way to rationalize away the valid rejection of products that are unfortunately “not yet ready for prime time.” In the evolution of ETFs that I have observed and actively participated in since 2004, there have been many new and innovative products proposed by small entrepreneurial companies who “don’t fit the mold” that have gained SEC “approval,” so to speak (it is technically incorrect to say the SEC has “approved” a product).
What The SEC Wants
The SEC has been very consistent in telling cryptocurrency innovators what they will be looking for in ETF applications. The trade-based media seem to have a deep sense of amnesia about those required criteria. They seem to hype every new application and then every new rejection (sometimes prompting unnecessary rallies or sell-offs in cryptocurrencies, which add to volatility).
To make it simple and clear, here is what the SEC is focused on: 1) removing or mitigating the potential for fraud or manipulation in Bitcoin or Bitcoin derivatives, 2) robust custody solutions, and 3) liquidity — meaning a market of sufficient size to support public trading of this asset.