The SEC has told spot ETP sponsors they must demonstrate that a significant amount of bitcoin trading occurs on a regulated market or that the underlying market “inherently possesses a unique resistance to manipulation beyond the protections that are utilized by traditional commodity or securities markets” (our emphasis).
Mr. Gensler knows the first criterion can’t be met because bitcoin trading largely occurs on crypto exchanges, which he wants to regulate but doesn’t have express legislative authority over. As for the second, the SEC has arbitrarily established a higher standard for approving spot bitcoin ETPs than for other commodities but hasn’t explained how to satisfy it.
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