Saying Goodbye to Crypto's Infant Anarchy

The recent launch of bitcoin futures products on exchanges regulated by the CFTC have reinforced this trend, prompting the adoption of anti-manipulation policies, better market surveillance, and information-sharing agreements between the crypto spot markets and regulated futures exchanges.

As crypto trading has survived and matured, we now we see institutional investor interest picking up.

It is a testament to the strength of the Security and Exchange Commission's investor protections that they want a way to take a position in crypto through a product on a regulated securities exchange.

Recently the SEC disapproved nine applications it received to list a crypto exchange traded product.

In recent remarks before the Consensus Invest conference, SEC Chair Jay Clayton seemed to pour cold water on SEC approval of any ETP as he re-iterated SEC concerns about the strength of market surveillance in crypto spot markets as well as protections against "Theft or disappearance" of crypto assets.

The SEC is right to focus on protecting investors against market manipulation and the security of their crypto assets.

The real question is whether the proposed ETP offers protections that are as strong as those afforded investors for other types of exchanged-traded products that have been approved by the SEC. With regard to protections against investor loss from criminal activity or operational error, the VanEck trust is providing significant protections.

The strength of market surveillance and anti-manipulation policies varies widely across the many crypto trading markets, and this is a cause for concern.

By accommodating greater institutional participation in crypto assets, the SEC could force improved standards in the spot markets where retail investors dominate - sometimes at their peril.

Testing an ETP with an institutional investor base could inform future work on a retail product giving individual investors venues to trade under the watchful eye of the SEC. Crypto assets are ready for the white linen treatment of a fully regulated securities exchange.