Bad News for Bitcoin ETFs 2022:
On June 2, 2022, the United States Commodity Futures Trading Commission (CFTC) Took action against the GeminiCrypto exchange established by billionaire twins Tyler And Cameron Winklevoss. Among other things, Gemini complains to CFTC about several false and misleading statements related to the possible self-certification of Bitcoin’s futures contract, the prices of which must be resolved through daily bidding (“Gemini Bitcoin Auction”). ComplaintThe CFTC specifically stated that these reports were designed to mislead the Commission as to whether the proposed Bitcoin futures deal would be subject to manipulation.
Although the Winklevoss brothers were not named in the case, the complaint alleges “Gemini officials, staff and agents […] Must be aware of or reasonably aware that statements and information were reported or omitted […] Were false or misleading. ” Required Markets engaged in derivative trading must have policies and procedures that ensure that Bitcoin is “contracts”, including attempts to award futures contracts. [are] Are not easily manipulated “and they provide reasonable” protection of market participants “.
Gemini gave a ritual Report Response to CFTC’s action:
“We have an eight-year track record of always doing the right thing, without asking permission or apologizing. We are waiting for this to be proven in court. “
However, the response of the founding duo was somewhat less professional. Cameron Winklevoss Has tweeted that:
I can respond to this nonsense when I get a break. But I do not know, maybe not, we will see. I’m very busy right now. For now, I will use the extra time I have to look at Top Gun Mavericks. I heard that was awesome!https://t.co/DJwZXQT3EB
– Cameron Winglows (cameron) June 2, 2022
Too bad the founders of Gemini did not take this case more seriously. The consequences of this actual fraud could not be limited to any of the fines assessed against Gemini by the courts, but could significantly affect the industry as a whole.
Related: What is the obstacle to pure-bitcoin ETF?
What has this got to do with Bitcoin ETFs?
The case against Gemini is not about one Transfer-trading fund (ETF), which refers to representations made about a particular bitcoin futures contract. It was not brought in by the U.S. Securities and Exchange Commission and Stands without approval Large and growing number of Bitcoin ETF proposals. However, it is about the possible manipulation of crypto markets.
The SEC’s record of refusing to recognize any spot-market Bitcoin ETFs is consistent on two fronts: to date, Bitcoin ETFs (as opposed to Bitcoin futures ETFs) have not been recognized in the sport or physical markets, revealing the SEC’s concern, Bitcoin pricing is very subject Manipulation To recognize Bitcoin ETFs. Without the approval of the SEC, bond exchanges cannot trade the proposed products under the traditional guidelines of what kind of interest they may sell in the bond exchange.
Admittedly, the SEC recently Approved In limited numbers of Bitcoin Futures ETFs, Including two under the same rule that proponents of Bitcoin ETFs rely on in spot markets. In part, the SEC relied on the CFTC’s commitment to Bitcoin Futures ETFs. Can List in CFTC-regulated transactions. As part of the CFTC process, the company needed The new product to comply with CFTC regulations and is self-certified as “not vulnerable to handling”. More generally, the SEC has concluded that the future ETFs of this bitcoin is protected against manipulation to the extent that it justifies allowing their trading in securities.
The current action against Gemini arises due to the alleged behavior that took place during the CFTC evaluation of the Gemini Bitcoin auction in 2017 and 2018 (after the SEC). Denied A request from the Winklevoss brothers seeking SEC approval for Bitcoin ETF). The fact that a large U.S. crypto exchange maintains itself as a record of regulatory compliance further strengthens the SEC’s view that crypto markets are subject to fraud and manipulation. We are not ready for Bitcoin ETFs.
Related: VanEck’s Bitcoin spot ETF shunt confirms SEC’s outlook on crypto
Is crypto really for criminals?
However, as the two suggest, the truth may be completely different Rising The extent of enforcement activity in the crypto space (indicating the presence of significant oversight), and the technical analysis of the criminal activity in space (conducted by independent agencies and showing a significant decline in the rate of criminal activity). For example, consider the 2022 Chineseology Report On crypto crime. This report documents a clear decrease in fraud and abuse as a percentage of all crypto transactions.
However, the headlines Proceed To report that the dollar value of crypto fraud has risen significantly. Understandably, news sources are shaping the stories to gather a wider audience, and the fact that $ 14 billion was stolen by fraudsters is a clearer topic than noting that crypto crime has been reduced to a percentage of illicit transactions. Significant decrease in 2021 by 0.15%.
What is somewhat surprising, however, is that the description of “for crypto criminals” continues to be emphasized by some regulators, especially in the SEC. SEC chair Gary Gensler Is Compared to the crypto ecosystem “Wild West” Complaint Crypto is “full of fraud, scams, and abuse.” Gensler was in mid-May 2022 Still the alarm goes off, Suggesting “There is a need to bring more investor protection to these crypto markets.” This was almost based on the decision of the SEC Double The size of the crypto assets and the cyber division of its enforcement department.
Thus, when a sister company, such as CFTC, initiates enforcement action against a key player in the crypto space, it adds fuel to the fire with the most detailed allegations of misrepresentation and misrepresentation that the manipulation of the bitcoin space took place. The SEC continues to focus. Furthermore, the SEC’s potential position that markets are not mature enough for the approval of a spot-market Bitcoin ETF is only strengthened when the founders of a crypto company facing that action expose their contempt on social media.
Related: In the protection of crypto: why digital currencies deserve a better reputation
So, should there be a spot-market Bitcoin ETF?
In October 2021 and early 2022, SEC Many futures-based Bitcoin ETFs are recognized. Although these products were already available on CFTC-regulated exchanges, this was a change in the SEC’s position that the entire crypto market could be more vulnerable to manipulation of exchange-traded products. The significance of the transition is that the futures and spot markets are now so closely linked that there is no rational basis for concluding that only one of them is sufficiently free from the risk of fraud or manipulation.
On April 6, 2022, SEC Approved futures-based ETFs are regulated under the same regulation that regulates spot-based ETFs. It Approved Another product like this in May 2022. The agency has refused to provide any “bitcoin rating” […] Has value or value as an invention or investment, ”he said.
Now that the SEC has decided that Bitcoin Futures ETFs can be traded on regulated securities, there is no reason to conclude that US investors should be denied the opportunity to participate in Bitcoin ETFs. Such Investment is widely allowed In other countries, including Canada and Australia. As for the CFTC’s enforcement action on Gemini, it would be unfortunate if there was a guard response from the Winklevoss brothers. Was before Turned down Permission to grant Bitcoin ETF by SEC – further restructures the progress of this perspective.
The opinions expressed are those of the author and do not necessarily reflect the views of the university or its affiliates. This article is for general information purposes only and should not be construed as legal advice.
The ideas, thoughts, and opinions expressed herein belong to the author and do not necessarily reflect or represent the views and opinions of the Cointelegraph.
Carol Gaborth Clayton n. He is a professor of law at the University of Arkansas (Fayetteville) School of Law.