SEC’s Bitcoin ETF Rejections All Cite Poor Safeguards and Widespread Crypto Market Manipulation
The Consensus Invest Conference held in November had a lot of notable speakers. But one of the most important was Jay Clayton, SEC Chairman.
Clayton addressed their repeated rejection of Bitcoin ETFs and highlighted their reasons for turning down those applications. The key issues being a lack of key safeguards designed to prevent market manipulation, and guaranteed increased and efficient market surveillance.
The latest of such rejections is Gemini’s application. The regulatory agency’s rejection document included the words manipulation and surveillance, 132 and 135 times respectively.
This clearly portrays the SEC’s intent on eliminating these two issues before issuing any approvals for the sale of Bitcoin ETFs on any platform.
Why Hasn’t Anyone Provided A Solution?
Clearly, these are significant issues, and one that the SEC isn’t willing to overlook.
So, why haven’t exchanges and other key players in the digital assets space done anything about this and implemented surveillance measures and other market safeguards? After all, these rejections have been the norm for months.
Well, the reality is that some exchanges tried to do this, but didn’t succeed. These exchanges made an effort to partner with firms that currently offer surveillance products and services in conventional trading markets.
Unfortunately, even that solution wasn’t enough to get the SEC’s approval. Why? Primarily because the crypto market is far more complex than the traditional trading markets.
And with estimates like 70 percent of the crypto market being manipulated by wash trading, pump and dump, spoofing and front running scheme, it makes sense that a more complex solution would be the best option for getting the SEC’s Bitcoin ETF approval.
A more complex market provides the perfect opportunity for market abuse and manipulation.
Since, smart contracts and blockchain offer extra layers of complexity, it makes sense that the best solution would be one that is market derived and based on the same technologies driving its native market.
Which is why a blockchain based solution would be ideal for keeping these excesses in check and eliminating the pressing issues.
These blockchain based solutions will be uniquely built for its market, and will provide the necessary effective measures and safeguards needed to keep the market sane and fair.
What Would These Solutions Look Like?
While developers might have to look to traditional trading solutions for ideas, they have to clearly understand that those won’t be enough.
They’ll need to incorporate blockchain based trading and solutions to the mix. Therefore, some of the features to consider would include:
The first of these is that the solutions must be in sync with blockchain’s technology. It must be able to read, interpret and intelligently present the necessary data and information.
Blockchain’s technology is completely unique, has a different set of terminologies, incredibly fast paced and has a different connectivity. Knowing how to read all these and implement them into the solutions is crucial to its success
Taking Note Of The Market’s Pace
Traditional trading markets are a five business day, 9.30-4pm affair. This means no trading on the weekends or after hours.
Crypto and blockchain based trading however, is a completely different animal. Trading is done all day every day, 365 days a year. Surveillance solutions would need to be able to keep up with the pace, provide realtime data and work non-stop.
Trading In Extreme Fractions
The blockchain markets are capable of accommodating both the whales and very small retail traders. This means that assets are often fractionized. For instance, ethereum can be traded in fractions that are as tiny as 18 decimal points.
This can be a real problem for traditional trading surveillance solutions that are built for far less fractionized trading. So, a blockchain based solution that takes this into consideration, whilst processing the data in realtime would be ideal.
Introduction Of Standardized Metrics
Traditional trading markets are often standardized, with assets across all platforms unified in their valuation and pricing. Blockchain based markets aren’t quite there yet.
So, the safeguard solution would have to deploy a set of rules, algorithms and many other attributes that are synchronized across all platforms, thus presenting a unified front and standard across board.