Ex-SEC official: Can a spot bitcoin ETF pass? How will the U.S. election next year affect the crypto market?

By: Former SEC Official John Reed Stark

Compilation: Wu said blockchain

Will the SEC approve the recent bitcoin spot ETF application?

I don’t think the current SEC will approve a bitcoin spot ETF application for a number of compelling reasons. Independent and objective experts at @BetterMarkets in an SEC opinion letter dated 8/8/23 regarding multiple proposed rule changes submitted by the SEC for listing and trading spot Bitcoin-based exchange-traded products Well done, they put it much better than I can say (links and excerpts below).

However, I also believe that trends in cryptocurrency regulation could change dramatically after Election Day.

Cryptocurrency and partisanship

Unfortunately, the issue of SEC regulation of cryptocurrencies has become increasingly partisan. This is surprising because when I first started writing about cryptocurrencies in 2017, cryptocurrencies weren’t a partisan issue at all.

For example, then-President Donald Trump, Secretary of State Hillary Clinton, and Congresswoman Maxine Waters all shared the same opinion about cryptocurrencies, that they are a dangerous and terrible plague.

see:

Additionally, the SEC’s cryptocurrency crackdown began with Republican-appointed SEC Chairman Jay Clayton. Chairman Clayton has been a vitriolic and persistent cryptocurrency critic with an extensive track record of years of anti-cryptocurrency speeches and congressional testimony, while also leading a series of groundbreaking cryptocurrency-related enforcement actions and aggressive/ Comprehensive SEC regulatory statements related to cryptocurrencies.

If a Republican is elected President of the United States in 2024

Given the partisan divide that has developed in the SEC with regards to cryptocurrencies in particular, I believe that if a Republican were elected President of the United States in 2024, a Republican appointed to the SEC would likely:

1. Significantly reduce the SEC’s cryptocurrency enforcement efforts, likely to primarily bring fraud cases, diverting efforts to bring charges away from pure registration violations (such as cryptocurrency trading platforms not registering as exchanges, broker-dealers, and clearing firms);

2. Become more receptive to approving bitcoin spot ETFs and more likely to take other significant pro-crypto regulatory actions.

Hester Pierce as SEC Chairman

Some background: The SEC is an independent federal agency established under the Securities Exchange Act of 1934 and headed by a committee of five commissioners. Commissioners are appointed by the President and confirmed by the Senate. The president designates one of the commissioners as chairman.

To ensure that the committee remains non-partisan, no more than three members may belong to the same political party. The President also designates one of the Commissioners as the Chairman, the SEC’s top executive officer.

When any President is elected, the current SEC Chair usually resigns and a new SEC Chair is usually not confirmed and appointed until at least 3-4 months after Inauguration Day.

So if a Republican is elected President, Chairman Gensler will likely step down and the senior Republican SEC commissioner appointed (in this case the famous “crypto mom” @HesterPeirce) will likely become Acting Chairman.

Also, given the current committee has an equal number of Republicans and Democrats, any votes by committee, especially related to cryptocurrency proposals from staff, could easily split 2-2 because there is at least one vacancy on the committee.

If @HesterPeirce becomes the acting chair of the SEC, the world should expect an abrupt halt to most US SEC crypto-related enforcement given her long track record of opposing most crypto-related SEC actions.

This is my point of view, for reference.