Jay Clayton, the former Chair of the U.S. Securities and Exchange Commission (SEC) expressed confidence on the probability of the first spot Bitcoin ETF product getting approved in the United States. He said the retail investors are willing to gain access to the cryptocurrency while the large institutions with surveillance mechanisms like Blackrock want to provide the product to the retail investors.

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Clayton’s comment comes at a jubilant time in the crypto market, where the chances of getting the first ever spot Bitcoin ETF got better thanks to the recent court judgment granting approval to Grayscale’s motion to allow the conversion of its GBTC Bitcoin Trust into a spot ETF. However, the Bitcoin price is yet to show signs of bullish trend over the development.

Spot ETF “Approval Is Inevitable”

The former SEC Chair said the approval of spot ETF is inevitable in the current circumstances, as the large financial institutions like Blackrock, Fidelity and Ark Invest have grown confidence in cash trading in relation to the crypto assets. He said the companies have cleared the air around fears that the trading was manipulative. Clayton added,

“It is clear that Bitcoin is not a security. It is something that retail investors want access to and importantly some of our most trusted providers want to provide this product to the retail public. An approval is inevitable.”

Earlier, CoinGape reported analyst comments that the odds for approval rose to 75% over the court’s granting the Grayscale motion to convert the company’s Bitcoin Trust (GBTC) into a spot Bitcoin ETF. On August 29, 2023, the US Court of Appeals for the District of Columbia Circuit handed the company a win the lawsuit against the federal regulatory agency.

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Anvesh reports major crypto updates around regulation, lawsuits and trading trends. Published around 1,000 articles and counting on crypto and web 3.0. He is currently based in Hyderabad, India. Reach out to him at anvesh@coingape.com or twitter.com/BitcoinReddy

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

According to former chairman of the SEC, Jay Clayton, cryptocurrencies serve a variety of functions and are tied to a range of industries, and the SEC should regulate only those industries that are related to them.

Clayton Believes In Crypto Technology

Jay Clayton, the former chairman of the Securities and Exchange Commission, or SEC, was appointed to the position by ex-President Donald Trump in 2017.

Clayton frequently supported Bitcoin (BTC) as a store of value throughout his time as the SEC’s chairman. Jay discussed bitcoin and how it should be controlled in the future during an appearance with CNBC’s Squawk Box broadcast on Wednesday.

The former SEC chair stated that he is a “huge believer in crypto technology” and that the benefits of its efficiency in the financial sector and tokenization are immeasurable.

Clayton tweeted:

“I am a huge believer in this technology. The efficiency benefits in the financial system and otherwise from tokenization are immense.”

Clayton’s comments come after the current SEC head, Gary Gensler, recently stated that the watchdog has no intentions to ban cryptocurrency, but that Congress may do so. However, Gensler cautioned that cryptocurrency in its current state is akin to the wild west without proper regulation.

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When questioned if the current chairperson is imposing too many limitations on the crypto industry, Jay responded that cryptocurrencies serve a number of purposes and are linked to a variety of industries, and the SEC should only regulate those industries.

“Crypto is a wide variety of products, with a wide variety of functions, and the rules of our financial system are clear and long-standing. If you are raising capital for a project, you have to register your capital raising with SEC. If you are trading securities it has to be on a registered venue, But there are many crypto sectors like stablecoins that are not securities and outside of SEC purview.”

Feds Should Regulate Crypto Appropriately

Cryptocurrencies, according to Clayton, should be allowed, but with adequate regulation. He believes the government should be “reactive to people who are violating our well-defined laws but proactive in encouraging the adoption of this technology throughout our financial system.” according to him.

During Clayton’s tenure, a Bitcoin ETF was not approved, which will now happen in 2021 under Gary Gensler. Since then, the SEC has been chastised for rejecting spot ETF applications but allowing Bitcoin futures ETFs. “There is no basis for the position that investing in derivatives for an asset is acceptable for investors but not investing in the asset itself,” Grayscale said to SEC secretary Vanessa Countryman in a letter. Under the Administrative Protections Act, or APA, the SEC was accused of treating the two Bitcoin ETF proposals unequally.

BTC Spikes after Fed confirmed it won't change interest rates. Source: Tradingview

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Image from Shutterstock, charts from TradingView

Gary Gensler, the current SEC chief recently gave an interview to Washington Post to talk about cryptocurrencies and regulations. He reiterated his earlier stance on the need for strict investor protection regulations and suggested he is here to clean the crypto market before it “spills.”

The security debate has also turned quite controversial given the ongoing Ripple lawsuit and the recent threat against Coinbase’s leading services. Gensler reflected on the issue but didn’t provide much clarity on what makes a crypto asset security while others as non-security but warned that exchanges and platforms dealing with crypto assets must be ready for enforcement.

“It’s highly likely that they have on these platforms securities investment contracts or notes or others that fit the definition of security. Those platforms should come in. They should figure out how to register, be it an investment investor protection remit. Now, not many have. And so I do really fear that we’ll keep bringing these enforcement cases. But there’s going to be a problem. There’s going to be a problem with lending platforms or trading platforms. And frankly, when that happens, I think a lot of people are going to get hurt.”

However, it is important to note that the SEC chief has maintained a similar stance since taking office, but hasn’t given any outline or plans on how the SEC is going to ensure investor protection without killing the budding crypto market.

Gensler’s record as an MIT professor who taught about blockchain and crypto assets gave many crypto enthusiasts hope that his appointment would make way for better regulations, especially after the controversial tenure of Jay Clayton the form SEC chief.

Gensler’s Regulatory Stance Could Harm Crypto Sector More Severely

During, Clayton’s tenure as SEC chief, the crypto market was relatively new with not much interest from institutional investors, and thus in the hindsight, the decision to reject all Bitcoin ETF proposals seems fair given the market size and demand. However, today when the crypto market is thriving with adoption from retail and institutional giants alike, Gensler’s decision could prove more disastrous for the crypto market.

Gensler has indicated that under the current definition of security, the majority of crypto assets qualify as a security. He also indicated that he doesn’t see crypto lasting long, which says a lot about the regulatory chief who has studied and advocated for the crypto assets in the past.

Gensler-led SEC is currently working towards regulating the defi market which many believe would kill one of the fastest-growing crypto markets and it seems they plan to go after stablecoin next, deeming it as security despite it being backed by US Dollar. Gensler even likened stablecoins to Poker-chips. He said,

“Stablecoins are acting almost like poker chips at the casino right now, so add to the Wild West analogy — we’ve got a lot of casinos here in the Wild West and the poker chips, these stablecoins, at the casino gaming tables. So I think there’s just a lot of warning signs and flashing lights that we might have a spill on aisle three, and I’d rather get ahead of it.”

About Author

An engineering graduate, Prashant focuses on UK and Indian markets. As a crypto-journalist, his interests lie in blockchain technology adoption across emerging economies.