Law Decoded: Bitcoin exchange-traded funds are put on the spot again, Nov. 29–Dec. 6

The Securities and Exchange Commission's continued resistance to spot Bitcoin ETFs draws industry players' ire.

Do you remember the time when a fleeting mention of Bitcoin, stablecoins or even central bank digital currencies by a top-ranking government official was considered major news all over the cryptoverse? Feels like it’s been forever. As we find ourselves in the midst of digital assets’ global mainstreaming, such statements come in droves every day and are expected. Randal Quarles, an outgoing member of the U.S. Fed’s board of governors, warned against overregulating stablecoins and even rebuked some of the conclusions that the President’s Working Group on Financial Markets had articulated in its November report. Treasury Secretary Janet Yellen admitted to remaining undecided on the issue of the digital dollar, but prospective Fed vice chair Lael Brainard seems to be all in on the CBDC project. It goes without saying that the leading makers of economic policy are deeply immersed in these issues.

Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

SEC on the ETF hot seat again

Meanwhile, the Securities and Exchange Commission is standing its ground on spot Bitcoin exchange-traded funds. WisdomTree’s application for a spot BTC product to be traded on the CBOE bZx Exchange became yet another to be turned down by the regulator. The rationale for the decision was familiar as the SEC’s verdict cited the proposed ETF’s sponsors’ lack of demonstrated capacity to prevent fraud and manipulation and protect investors. 

The SEC has been under fire from multiple directions for its discriminatory stance of accepting derivatives-based products based on an asset’s derivatives while inhibiting the products based on the asset, itself. The latest round of criticism came from asset manager Grayscale Investments in a letter to SEC Secretary Vanessa Countryman where the firm argues that the failure to treat the two types of BTC-based products equally constitutes a violation of the Administrative Protections Act (APA).

Crypto CEOs to go up the Hill

Later this week, the U.S. House Committee on Financial Services is calling a hearing focused squarely on digital assets and the future of finance — in fact, that is what the hearing is officially called. Top crypto CEOs, including those of Circle, FTX, Bitfury and Coinbase, will climb Capitol Hill to make their case for the benign regulation of the industry and defend its role in the nation’s economic competitiveness. This could be the biggest opportunity in months for the leaders of the crypto space to catch key lawmakers’ ears and deliver their opinions and recommendations directly.

Clampdown updates

The last issue of this newsletter focused extensively on the disconcerting news out of India where a new bill hinted at a possible blanket ban on all “private cryptocurrencies.” The good news is that things might be less dreadful than they initially appeared. The bill’s sponsor, former Indian Finance Secretary Subhash Garg, followed up with a statement that the language around the prospective ban was “misleading” and that the actual shape of the nation’s crypto regulation will emerge after extensive discussions with stakeholders and industry participants.

Furthermore, a cabinet note obtained by local media suggests that the government had been eyeing a set of regulatory measures around crypto assets rather than an outright ban.