Cryptocurrency trading has been with us for a decade, but they never seem to be too far from controversy, and even when there is good news for the proto asset class there always seems to be a balancing item going the other way.
Maybe that’s just part of the natural evolution of new financial instruments as CFDs and financial spread betting once were. We should learn to live with the fact that there will be more than a fair share of dead ends, disappointments and scandals, particularly in a market place that is decentralised and largely without any form of regulatory control and whose ethos is to avoid centralisation and regulation at almost any cost.
However, much as it might irk the hacker mentality of many crypto participants, regulators are taking an increasing interest. Something Forex brokers are hoping to cash in on.
Mixed messages from US regulators on Cryptos
We recently wrote about the UK FCA and their proposals to limit retail trader’s exposure to Cryptocurrency derivatives. There were two further developments last week on the other side of the Atlantic with two US regulatory heavyweights making, what on the face of it, could appear to be contradictory announcements, at least as far as their tone and outcome were concerned.
Firstly, the US CFTC or Commodity Futures Trading Commission the body that oversees futures and derivative markets, and their participants in the USA, made a statement about Ethereum.
The regulator’s chair Heath Tarbert announced that after months of investigation and deliberation the CFTC has decided to classify Ether as a commodity. Ether, of course, is the second-largest cryptocurrency by capitalisation.
The CFTC categorised Bitcoin in the same way back in 2015 that decision laid the path towards exchange-traded Bitcoin futures, the CFTC chair suggested that Ether might follow a similar path “when conditions are right”
Exchange-traded futures on Bitcoin have not necessarily been a raging success but they have served to move Bitcoin closer to the mainstream and they have probably helped to improve price discovery and price stability to some extent.
The US Securities and Exchange Commission or SEC seems to be taking a much harder line on cryptocurrency investments however, as it once again rejected a proposal for a bitcoin-focused ETF. In this case a proposition from Bitwise Asset Management and its exchange partner NYSE Arca.
The SEC has ruled against the nascent ETF offering because it did not demonstrate that it had sufficient systems in place to prevent what the regulator called “fraudulent and manipulative acts and practices”
This rejection is the latest in a long line of rebuttals for crypto-related ETFs by the SEC and Bitwise has said that they will work with the regulator to resolve the concerns and ultimately re-apply for approval. Reading between the lines, however, that does not sound like an easy task.
From an investor’s point of view, it seems that regulators across the globe are as divided on how to treat cryptos as miners and developers are when a cryptocurrency forks and until that change’s cryptocurrencies are likely to remain a frontier market.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.