CFTC Argues with SEC's Grounds

CFTC Commissioner Argues Against SEC’s Grounds for Not Approving Bitcoin ETF

Brian Quintenz, an official at the United States CFTC, has argued against the SEC’s grounds for disapproving a Bitcoin ETF.

Quintenz made his comments amid a panel at the BiPartisan Policy Center in Washington D.C. on February 12.

Quintenz particularly argued that potential price manipulation need not be a barrier to the SEC approving a Bitcoin ETF. the CFTC Commissioner participated in the panel alongside Commissioner at SEC, Heister Peirce.

Peirce has notably earned the moniker of ‘Crypto Mom’ owing to her vocal dissent against the SEC’s move to twice reject a BTC ETF proposal from the Winklevoss brothers.

According to the reports, the SEC has reiterated its qualms over inadequate “resistance to price manipulation” several times in its rulings or reviews of BTC-based ETFs.

Quintenz drew a parallel between the SEC’s stance and that of his own agency, while noting that the CFTC’s “jurisdiction over […] [Bitcoin futures] contracts requires that they not be readily susceptible to manipulation.”

However, he went on to underscore that the qualification of readily susceptible is an important nuance, given that any item can be manipulated. There are certain mechanisms that he proposed, which can be used for making prospective manipulation less likely –

“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.”

Quintenz gave the example of one of the BTC futures contracts the CFTC has approved for the market, which is designed to be settled to “multiple volume weighted average prices in five minute increments over the course of an hour across multiple exchanges.”

This means that for any actor, who is intending to manipulate the settlement index –

“[…] they would have to have the majority of volume on multiple exchanges in multiple five minute periods. Could they do it? Maybe. Would we know about it? Immediately.”

Commissioner Peirce took part in the discussion of her agency’s approach to reviewing proposed cryptocurrency-focused products, noting that –

“At the SEC we have been unwilling to sign off on a Bitcoin ETF thus far. My concern is that it looks a bit like a merit based approach, judging the underlying Bitcoin market and saying we don’t think these are regulated enough. You know, there’s lots of markets that aren’t regulated, but we nevertheless build products on top of them.”

As reported previously, Peirce’s dissent from the SEC’s negative ruling on the Winklevoss Bitcoin ETF application extricated from her view that the agency had overstepped its limited role.

As indicated by the Commissioner, the SEC was centered-around the characteristics of the underlying Bitcoin spot market, instead of the derivative the applicants sought to list, to make its decision.