Potential price manipulation should not be a barrier to the approval of Bitcoin ETFs by the Securities and Exchange Commission. Brian Quintenz, a Commissioner at the United States Commodity Futures Trading Commission ( CFTC), argued this at a panel at the BiPartisan Policy Center in Washington D.C. recently.
Why Potential Price Manipulation Reason Should Not Hinder Bitcoin ETF Approval
Bitcoin ETF rejection by the SEC on the ground of the potential price manipulation is not a reason good enough according to Brian Quintenz. At a panel at the Bipartisan policy centre in Washington D.C., Quintenz explained the difference between the stance of CFTC, his agency and that of the SEC on price manipulation.
He noted that The CFTC rules over the Bitcoin futures and it requires that they must not be readily susceptible to manipulation. The qualification of being readily susceptible is an important nuance according to him considering that any product with sufficient resources can be manipulated. However, despite this, he stated that a certain mechanism could be applied to make prospective manipulation significantly less likely — mechanism such as basing a product on an index rather than a commodity.
Quintenz noted that there are mathematical ways through a settlement index to design a contract where even if there isn’t a lot of liquidity on one exchange referenced, the index itself is not readily susceptible to manipulation. He further cited the measure applied to BTC future contract the CTFC has approved. This is designed to be settled to multiple volumes weighted average prices in five minutes increment throughout an hour across multiple exchanges.
This means that for any actor to manipulate the settlement index, there is a need to obtain the majority of volume on multiple exchanges in multiple five minutes period. If that is possible, they will know immediately and take necessary action.
SEC Unwilling To Sign Off Bitcoin ETF
Heister Peirce, a SEC commissioner that also participated in the panel discussion, noted that the SEC has been unwilling to sign off Bitcoin ETF. Peirce stated that the concern is that it looks a bit like a merit-based approach considering the underlying Bitcoin market and saying they don’t think these are regulated enough. Peirce further stated that;
“You know, there are lots of markets that aren’t regulated, but we nevertheless build products on top of them.”
Peirce has been dissenting to the SEC ruling on Bitcoin ETF, based on the view that the agency had overstepped “its limited role.”