- The approval of spot Bitcoin ETFs has sparked confusion, as they only provide indirect regulation while the underlying crypto market remains largely unregulated.
- The CFTC chair argues regulating the digital asset cash markets is critical to address issues like transparency and integrity.
- There are growing calls from the crypto industry for regulatory clarity from the US government, with many anticipating further developments after the 2024 election.
The recent approval of spot Bitcoin exchange-traded funds (ETFs) has sparked confusion over the extent of regulatory oversight for cryptocurrencies. While ETFs introduce indirect regulation, the underlying crypto market remains largely unregulated according to experts.
The Thin Veneer of ETF Oversight
The chair of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, argues the approval of spot Bitcoin ETFs risks being misconstrued as comprehensive regulation. He explains that ETFs only provide a “thin layer of indirect regulation” since they source Bitcoin from unregulated crypto exchanges. Behnam warns the lack of transparency and oversight in crypto cash markets raises concerns.
The Need for Direct Regulation
Behnam states “there remains nothing firmly in place” to address inconsistent practices among crypto exchanges. He argues regulating the digital asset cash markets has never been more critical. The CFTC chair raises issues around trade settlement, conflicts of interest, data reporting, cybersecurity, customer protections, transparency and overall integrity.
Industry Calls for Regulatory Clarity
There have been growing calls from the crypto industry for regulatory clarity from the US government. In September 2022, CFTC Commissioner Caroline Pham advocated for a limited pilot program to test crypto regulations. Many anticipate further regulatory developments following the 2024 presidential election.
The HashFlare Scam and Extradition Case
Ivan Turogin and Sergei Potapenko, co-founders of crypto mining company HashFlare, face extradition from Estonia to the US on fraud charges. Their company allegedly operated as a Ponzi scheme, taking in $575 million before collapsing in 2019. Both men face up to 20 years in prison if convicted. This high-profile case highlights the need for clearer crypto regulations.