As Race for Bitcoin ETF Heats Up, SEC Identifies Cryptocurrency as a Top Priority in 2019

The crypto boom of 2017 caught federal regulators by surprise. The subsequent crash of 2018 forced them to closely examine the market, including the sale, trading and management of cryptoassets. Now, the U.S. Securities and Exchange Commission (SEC) is prepared to take a proactive approach to monitoring the nascent asset class at a time when more issuers are throwing their weight behind a crypto-backed exchange-traded fund (ETF).

Crypto Becomes a Priority

In the newly released 2019 Examination Priorities, the SEC’s Office of Compliance Inspections and Examinations (OCIE) has identified cryptocurrencies as one of six regulatory focal points this year. More attention and resources will be directed at the digital asset market due to its its rapid growth and perceived risks to retail investors.

“Given the significant growth and risks presented in this market, OCIE will continue to monitor the offer and sale, trading, and management of digital assets, and where the products are securities, examine for regulatory compliance,” the report said.

The regulator added that it will conduct high-level inquiries on market participants “offering, selling, trading, and managing these products…” Market participants include broker-dealers, trading platforms and investment advisers.

The report was released less than six weeks before the SEC is set to make a decision on a highly regarded bitcoin ETF. Although the agency has rejected more than a dozen crypto ETF applications, a joint proposal put forward by VanEck and SolidX is believed to have the best shot of being approved.

That’s because the proposed product includes safeguards to protect retail investors against fraud and manipulation. It also proposes to hold a repository of physical bitcoin as opposed to futures contracts and other derivative-based products. More on this story can be found here: SEC Delays Decision on VanEck SolidX Bitcoin ETF Until Next Year.

A crypto startup by the name of Bitwise Asset Management has also applied for bitcoin ETF product with the SEC. Like the VanEck-SolidX product, the Bitwise application is attempting to address the myriad of regulatory concerns put forth by the SEC in its previous rulings on crypto-backed ETFs.

If Bitcoin ETF Doesn’t Happen by February, How Will it Affect the Market?

Japan Not Considering Bitcoin ETF: FSA

Reports that Japan was considering approving a bitcoin ETF were quickly shot down this weekend by a spokesperson from the country’s Financial Services Agency (FSA). As and CCN report, the FSA representative said, “There is no such fact that we are considering approving ETFs which track crypto-assets at present. We are not currently considering approving them.”

Last week, Bloomberg and several other sources reported that Tokyo’s financial regulators were exploring the possibility of a crypto ETF tied to bitcoin futures. The speculation put the regulator in the same boat as the SEC, which has been reluctant to approve a bitcoin fund but has nevertheless invited public dialogue on the matter.

At present, Japan does not believe there is “constructive and social significant of trading cryptoassets derivatives,” the spokesperson said.

Japan was one of the first countries to approve and regulate cryptocurrency markets, but a series of high-profile attacks on domestic exchanges forced regulators to adopt more stringent measures. Exchanges have also come together to develop a self-regulatory group to prevent further attacks from undermining the market.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi