Not having a solid surveillance system and not being a trusted custody, are two prominent reasons that hold the SEC from approving cryptocurrency, and in particular, bitcoin ETF.
Solutions for the fears referred to are being explored on the other hand, but until an agreement is reached to, controversies regarding digital assets will keep floating on the surface every now and then.
At the CoinDesk’s Consensus Invest conference, the SEC expert referred to risks of fraud and manipulation attempts the market witnessed, which brought the SEC to turn down many ETF applications for consumer protection purposes.
“We’ve seen some thefts around digital assets that make you scratch your head… We care that the assets underlying that ETF have good custody and that they’re not going to disappear.”, said Clayton.
One of the points referred to in the context above, is that digital assets exchanges lack a unified colour of surveillance other ordinary stock exchanges have, the thing that in return pushes investors away from trading in cryptos, while they feel confident dealing with exchanges like the New York Stock, and Nasdaq, where both of them have a system of surveillance to monitor, track, prevent any suspicious activity or transaction, and further investigates it.
“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation… It’s an issue that needs to be addressed before I would be comfortable”, Clayton explained at the conference.
“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade,” Clayton added.
The fears talked about are already in the consideration of financial giants
In a harmonious tone, Fidelity had announced last October that it was launching a separate company to handle cryptocurrency custody and trade execution for institutional investors.
The issues Clayton referred to are also being considered by big names in the venue, where cryptocurrency companies like Coinbase, Gemini, BitGo, Ledger and ItBit are among those already working on similar solutions. Japanese bank Nomura announced in its turn last May about plans to offer crypto custody, and Goldman Sachs and Northern Trust are studying custodial services.
Once again, in spite of the options referred to, Clayton pointed to that custody offerings still “need to be improved and hardened.”
The media reported earlier in June, that Clayton made it clear that the SEC would not change the rules for cryptocurrency with regards to defining what is or what isn’t a security, given the U.S. has a $19 trillion securities market that’s “the envy of the world” following the current rules, as per his description.