The ‘End of the Beginning’ for Crypto

September 16, 2022

Ric Edelman​The long-standing turf war to regulate digital assets may be coming to a close. Securities and Exchange Commission Chairman Gary Gensler said last week he supports the idea of Congress giving more power to the Commodity Futures Trading Commission to regulate cryptocurrencies. 

Allowing the CFTC to handle bitcoin and ethereum markets would free up his agency to focus on the remaining sectors of the cryptomarket. Gensler has said all other cryptocurrencies are securities and should be regulated by existing securities laws under the jurisdiction of the SEC. 

The warming relationship between the two regulators could usher in needed regulations. With a more robust regulatory framework on the horizon, some analysts are expecting increased adoption from institutional investors.  

ETF.com sat down with Edelman on the sidelines of the recent Future Proof conference in sunny Huntington Beach, Calif. to talk bitcoin ETFs and the current state of the crypto landscape. 

ETF.com: What’s happening in crypto that no one is talking about? 

Ric Edelman: There is a huge sea change over the past year to 18 months in the attitude of the same agencies regarding crypto. We have gone from the question, “Will the government ban bitcoin?” to “How is the government going to regulate it?”  

It’s no longer a question of if but how. There are now dozens of bills in Congress on crypto legislation and almost all the federal agencies are issuing reports or seeking public comment—the IRS, SEC, CFTC, the Fed, FINRA—all on the issue of how we regulate the various facets of digital assets, stablecoins and custodian exchanges.  

We need rules of the road that are consistent across jurisdictions, and not just state to state or state versus federal, but the U.S. versus other countries. Crypto is a 24/7 globally traded asset. And within the next two years, we're going to see clarity. 

ETF.com: When can we expect meaningful progress from regulators on digital assets?  

Edelman: So, it’s an iterative step in the mainstreaming of crypto. I find it ironic that the SEC approved a bitcoin ETF with the futures contract based on the underlying asset of a bitcoin, but won’t approve the bitcoin ETF itself. It's literally the same as the SEC saying “We will allow stock futures ETFs—but not stocks.”  

By the same notion, the SEC has said yes to three times inverse ETFs and single-stock ETFs, but won't say yes to a bitcoin ETFs based on the allegation that a bitcoin ETF would be too risky. This is nonsensical on its face and demonstrates that Gary Gensler has a bias that is unsupportable and unjustified and will eventually collapse under its own weight.  

And that’s exactly what a lawsuit is arguing right now. It has accused the SEC of acting arbitrarily and capriciously and in violation of their own rules for the review and approval of the bitcoin ETF applications. 

ETF.com: How can regulators come together to find a solution? 

Edelman: The Congressional Blockchain Caucus now has over 40 members, meaning 10% of the House is a part of it. The members realize there’s a huge economic opportunity for their individual states. It creates green jobs, tech jobs, high-paying jobs in states like New York, Wyoming and Colorado.  

But dozens of other states are clamoring g to get engaged. The mayor of Miami is trying to make Miami the bitcoin capital of the country. Ted Cruz wants to make Texas the oasis on planet Earth for bitcoin. Maxine Waters, the chair of the Financial Services Committee, says we're in a global space race for digital assets, so there's widespread acknowledgment that this represents a huge economic opportunity.  

 

Contact Sean Allocca at [email protected] 

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