Top US financial regulator pours more cold water on the one thing Bitcoin investors need right now

SEC Chairman Jay Clayton. (Justin Sullivan / Getty Images)
  • SEC chairman Jay Clayton has made some of his most direct comments yet on why the regulator won’t approve a Bitcoin ETF.
  • Clayton said crypto exchanges are prone to manipulation, and security measures around asset custody aren’t adequate.

A Bitcoin exchange traded fund (ETF) looks unlikely to be approved by US regulators anytime soon.

Jay Clayton, Chairman of the US Securities & Exchange Commission (SEC), directly addressed the issue at a conference in New York overnight.

He said the exchanges that cryptocurrencies trade on are still to prone to manipulation, and there aren’t enough safeguards for custody of the underlying assets.

Those issues will have to be addressed before Clayton is “comfortable” approving an ETF, according to CNBC.

“What investors expect is that trading in that commodity that’s underlying the ETF is free from the risk or significant risk of manipulation,” Clayton said.

“Those kinds of safeguards don’t exist in many of the markets where digital currencies trade.”

A Bitcoin ETF has long been viewed as a key development among crypto industry advocates, who view it as a vehicle to increase liquidity and attract institutional investment into the space.

In August this year, the SEC rejected nine applications for a Bitcoin ETF.

That followed an unsuccessful application in July by Cameron and Tyler Winklevoss, founders of Gemini crypto exchange.

Volatility in crypto markets reared its head again last week when Bitcoin prices plunged below $US4,000.

And in addition to volatile price action, “we’ve seen some thefts around digital assets that make you scratch your head”, Clayton told Glen Hutchins, of private equity firm Silver Lake, who was moderating the panel.

“We care that the assets underlying that ETF have good custody, and that they’re not going to disappear.”

Clayton’s comments were the clearest indication yet that the SEC remains a considerable way off approving an ETF for US markets.

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