Hester Peirce, commissioner of the U.S. Securities and Exchange Commission (SEC), center, listens during a House Financial Services Committee hearing in Washington, D.C., U.S., on Tuesday, Sept. 24, 2019.

Andrew Harrer | Bloomberg | Getty Images

Hester Peirce is perplexed.

For years, the Securities and Exchange Commission, of which Peirce is a member, has denied applications by the nation's exchanges and financial firms to list securities that track the performance of popular digital currency bitcoin.

Earlier say, 10 years ago concerns about potential market manipulation and liquidity may have made sense, but things have changed.

"That is the probably the biggest, the most-often-asked question that I get: When will the SEC approve a bitcoin exchange-traded product?" Commissioner Peirce said in an interview with CNBC on Thursday.

"I thought that if we had applied our standards as we have applied them to other products, we would already have approved one or more of them," she said. "With each passing day, the rationale that we have used in the past for not approving seems to grow weaker."

The SEC applies a "unique, heightened standard" to filings related to digital assets, she wrote in 2020. And she has argued that the agency is asking exchanges and would-be ETF sponsors for assurances beyond what it asks for traditional, equity-based products.

"People of a regulatory mindset, when they encounter something new like this, say, 'Oh, wait a minute: The market for bitcoin looks a bit different than the markets we're used to,'" Peirce said Thursday.

Now, she added, the bitcoin market looks more like an established market that has more participation from institutional and mainstream retail investors.

"So, I think the markets have matured quite a bit," Peirce said.

Renewed calls for an SEC-approved bitcoin ETF come just weeks after the regulator said it would again delay its decision on whether to approve an application by VanEck to list shares of its Bitcoin Trust on the Chicago Board of Exchange's BTZ Exchange.

Regulators said in a letter dated June 16 that they would take additional time to seek comments from the public. Specifically, the SEC is asking investors and academics for their opinions on whether bitcoin ETFs could be vulnerable to manipulation, or whether bitcoin itself is sufficiently dispersed and therefore resistant to similar underhanded tampering.

But Peirce, a Republican appointed as one of the SEC's five commissioners by former President Donald Trump, has long decried what she sees as a double standard at her own agency when it comes to bitcoin products.

Perhaps her most pointed objection came in a 2018 dissent, when she argued that the SEC should have approved an application filed by the Chicago Board of Exchange's Bats BTZ Exchange to list and trade shares of the Winklevoss Bitcoin Trust.

"By precluding approval of cryptocurrency-based ETPs for the foreseeable future, the Commission is engaging in merit regulation," she wrote at the time. "Bitcoin is a new phenomenon, and its long-term viability is uncertain. It may succeed; it may fail. The Commission, however, is not well positioned to assess the likelihood of either outcome, for bitcoin or any other asset."

Three years later, the current VanEck filing similar to pending bitcoin ETF applications from Fidelity, Cathie Wood's Ark Invest, and several others is viewed by the industry as a litmus test of an SEC now helmed by a cryptocurrency expert, Chairman Gary Gensler.

Former Commodity Futures Trading Commission Chairman Gary Gensler testifies at a U.S. Senate Banking Committee hearing on systemic risk and market oversight on Capitol Hill in Washington May 22, 2012.

Jonathan Ernst | Reuters

His nomination to lead the SEC by President Joe Biden, and his subsequent confirmation in the Senate, was met with optimism by many in the crypto community, as he is seen as a practiced hand in crafting novel financial rules.

Gensler, who has taught crypto courses at the Massachusetts Institute of Technology, is perhaps best known for his influential tenure as chair of the Commodity Futures Trading Commission in the Obama administration. While there, Gensler helped devise and institute a new oversight regime for the swaps market that had been largely unregulated prior to the financial crisis.

So, while Democrat Gensler may not necessarily agree with Trump-appointee Peirce in all matters, they may align in wanting a more proactive SEC when it comes to bitcoin regulation.

Denying bitcoin ETF applications not only runs the risk of a double standard but also may leave thousands of investors with few, more-dangerous alternatives.

"The complications of not approving [an application] become stronger, because people are looking for other ways to do the same kinds of things that they would do with an exchange-traded product," she said. "They're looking at other types of products that aren't as easy to get in and out of, they're looking at companies, perhaps, that are somehow connected with bitcoin or crypto more broadly."

Bitcoin itself has suffered a violent start to the summer and has seen its price swoon more than 40% over the last three months. Though it remains one of the most actively traded digital assets, some market watchers say bitcoin is at a critical juncture.

"It looks like it may be getting ready for a retest of $30,000, and that could be critical," UBS director of NYSE floor operations Art Cashin said on Thursday. "If you break the $30,000, then traders will look to see if there's a trapdoor, cascade sell-off that follows."

Its dizzying ups and downs come even as a growing number of businesses and banks, including payments companies Square and PayPal, have started to facilitate bitcoin transactions.

Meanwhile, Bank of New York Mellon said in February that it will begin financing bitcoin, a key development as it is both the nation's oldest bank and a leader in custody banking.

As of late Friday morning, bitcoin was up 1.6% around $33,550.

Despite the currency's volatile price swings, Peirce remains convinced that a bitcoin ETF is overdue.

It's not the SEC's job to approve or reject applications based on the merits of the investment itself, she said Thursday, especially if exchanges are meeting statutory requirements for protecting investors from fraud.

"Bitcoin now is so decentralized. The number of nodes that are involved in Bitcoin is large, and the number of people who have an interest in keeping that work decentralized is very large," she said. "People should make their own decisions: If people don't want to buy bitcoin because they think it's manipulated, they shouldn't buy bitcoin."

Visit link:
The SEC should have approved a bitcoin ETF a long time ago, regulator Peirce says - CNBC

Bitcoin sank to a two-week low Monday on reports that China has intensified its crackdown on cryptocurrency mining.

The world's largest digital currency fell as low as $31,760 Monday morning, dropping below $32,000 for the first time since June 8, according to data from Coin Metrics. It was trading at $32,472 at 4:00 p.m. ET, down 8% on the day. Smaller rivals like ether and XRP also fell 12%.

Many bitcoin mines in Sichuan were shuttered Sunday after authorities in the southwestern Chinese province ordered a halt to crypto mining, according to a report from the Communist Party-backed newspaper Global Times. More than 90% of China's bitcoin mining capacity is estimated to be shut down, the paper said.

Bloomberg and Reuters also reported on the move from Sichuan authorities. It follows similar developments in China's Inner Mongolia and Yunnan regions, as well as calls from Beijing to stamp out crypto mining amid worries over its massive energy consumption.

Separately, the People's Bank of Chinasaid Mondayit hadurgedAlipay, the payments service run by Alibaba affiliate Ant Group, and some major banksto crack downon crypto trading. China has already banned financial institutions from providing crypto-related services.

"China often does this," Charles Hayter, CEO of crypto data firm CryptoCompare, told CNBC via email.

"When China sneezes, bitcoin catches a cold. But this flexing of regulatory muscle is often just that in the past eight years, this story has risen its head at least three times."

China's crackdown appears to have led to a significant decline in bitcoin's hash rate or processing power which has fallen sharply in the last month, according to data from Blockchain.com. An estimated 65% of global bitcoin mining is done in China.

Bitcoin's network is decentralized, meaning it doesn't have any central party or middleman to approve transactions or generate new coins. Instead, the blockchain is maintained by so-called miners who race to solve complex math puzzles using purpose-built computers to validate transactions. Whoever wins that race is rewarded with bitcoin.

This power-intensive process has led to growing concerns over the potential environmental harm of bitcoin, with everyone from Tesla CEO Elon Musk to U.S. Treasury Secretary Janet Yellen raising the alarm. China, where most bitcoin mining is concentrated, relies heavily on coal power. Last month, a coal mine in the Xinjiang region flooded and shut down, taking nearly a quarter of bitcoin's hash rate offline.

However, miners in China often migrate to places like Sichuan, which are rich in hydropower, in the rainy season. And some industry efforts have been launched including the Bitcoin Mining Council and the Crypto Climate Accord in an effort to reduce cryptocurrencies' carbon footprint.

CNBC's Tanaya Macheel contributed reporting

More:
Bitcoin (BTC) price drops on China crypto mining crackdown

Follow @crypto Twitter for the latest news.

A pair of South African brothers have vanished, along with Bitcoin worth $3.6 billion from their cryptocurrency investment platform.

A Cape Town law firm hired by investors says they cant locate the brothers and has reported the matter to the Hawks, an elite unit of the national police force. Its also told crypto exchanges across the globe should any attempt be made to convert the digital coins.

Following a surge in Bitcoins value in the past year, the disappearance of about 69,000 coins -- worth more than $4 billion at their April peak -- would represent the biggest-ever dollar loss in a cryptocurrency scam. The incident could spur regulators efforts to impose order on the market amid rising cases of fraud.

The first signs of trouble came in April, as Bitcoin was rocketing to a record. Africrypt Chief Operating Officer Ameer Cajee, the elder brother, informed clients that the company was the victim of a hack. He asked them not to report the incident to lawyers and authorities, as it would slow down the recovery process of the missing funds.

Some skeptical investors roped in the law firm, Hanekom Attorneys, and a separate group started liquidation proceedings against Africrypt.

We were immediately suspicious as the announcement implored investors not to take legal action, Hanekom Attorneys said in response to emailed questions. Africrypt employees lost access to the back-end platforms seven days before the alleged hack.

The firms investigation found Africrypts pooled funds were transferred from its South African accounts and client wallets, and the coins went through tumblers and mixers -- or to other large pools of bitcoin -- to make them essentially untraceable.

South Africa Plans to Regulate Crypto Trading in Phased Manner

Calls to a mobile number for Cajee were immediately directed to a voicemail service. He and his brother, Raees, 20, set up Africrypt in 2019 and it provided bumper returns for investors. Calls to Raees also went straight to voicemail. The company website is down.

The saga is unfolding after last years collapse of another South African Bitcoin trader, Mirror Trading International. The losses there, involving about 23,000 digital coins, totaled about $1.2 billion in what was called the biggest crypto scam of 2020, according to a report by Chainalysis. Africrypt investors stand to lose three times as much.

Crypto Havens Lure Firms Fleeing South Africa Regulator Fear

While South Africas Finance Sector Conduct Authority is also looking into Africrypt, it is currently prohibited from launching a formal investigation because crypto assets are not legally considered financial products, according to the regulators head of enforcement, Brandon Topham. The police have not yet responded to a request for comment.

China has recently escalated its crackdown on cryptocurrency trading after a frenzied surge in Bitcoin and other tokens over the past six months heightened longstanding Communist Party concerns about the potential for fraud, money laundering and trading losses by individual investors.

In January, the daily value of crypto-asset trading exceeded 2 billion rand ($141 million) for the first time in South Africa, suggesting significant appetite in a market that was largely going unchecked by regulatory powers.

Before it's here, it's on the Bloomberg Terminal.

Excerpt from:
South Africa Africrypt Bitcoin Scam?: Cajee Brothers Missing Along With Billions - Bloomberg

Longtime crypto bull Meltem Demirors reiterated her confidence in the cryptocurrency Tuesday, telling CNBC she believes the correction in bitcoin is simply weeding out the investors with "paper hands."

Paper hands is a term used in the crypto community to characterize people who sell a digital asset such as bitcoin when turbulence strikes markets. It's the opposite of so-called diamond hands, or ardent believers who say they will hold for the long term.

"We had 200 days of market expansion. You can't have a number go up forever. That doesn't happen in any market," Demirors said on "The Exchange." "What we're seeing is a correction, a contraction, and a lot of what is getting shaken out is what we call the 'paper hands,' the 'weak hands.'"

Demirors, the chief strategy officer at digital asset investment firm CoinShares, pointed to transaction activity on the bitcoin blockchain to support her view.

"There's a lot of retail that entered, didn't do their research, and is now selling. There are not a lot of long-term holders selling," she said. "If we look at on-chain activity, wallets that have been holding for a long time have actually been using this opportunity to accumulate."

Demirors' remarks on CNBC follow a wild ride for bitcoin Tuesday, which began with a heavy drop below the key $30,000 support level beforebouncing back into positive territoryin the afternoon. Analystshad been watchingthe $30,000 level after the cryptocurrency experienced a series of losses in May.

Earlier Tuesday morning, Wall Street strategist Tom Lee hadtold CNBCthat the world's largest cryptocurrency by market value faces a rough technical picture in the near term but that he still believes that bitcoin by market value could reach $100,000 per token by the end of 2021.

Like Demirors, Lee said he believes a lot of the recent selling has been from retail traders who jumped into bitcoin earlier this year when the cryptocurrency was marching higher toward its all-time high near $65,000 in April.

"I think we're going to continue to see consolidation here," Demirors said. "There is a lot of macro-uncertainty. Obviously, there's a lot of uncertainty around policy. There's also a lot of negative headlines."

China has recently been intensifying its crackdown on cryptocurrency.

"I think part of this is just the cycle we go through every several years with crypto, but we are seeing a lot of new inflows. We are seeing a lot of activity, in particular, on the market side," Demirors said.

While Demirors said "bitcoin has always been volatile," she explained that during the steep pullback in May, there was "a bunch of leverage coming off across the board. Now, we're done deleveraging. Now we're seeing a lot of cash selling."

View post:
Crypto strategist says bitcoin pullback is shaking out investors who have 'paper hands' - CNBC

Text size

Bitcoins price, and crypto-related stocks, have tumbled over the past week as China has cracked down on cryptocurrency mining and banking. But one exchange-traded fund with big holdings of the digital currency has made gains regardless.

The $5.8 billion ARK Next Generation Internet ETF (ticker: ARKW), run by star fund manager Cathie Wood, is one of the ETFs with the most Bitcoin in its portfolio. That is no surprise given that Wood has famously said the digital currency would rise to as much as $500,000.

As of Tuesday, the fund had a 3.6% weight, or $207 million worth of shares, in the Grayscale Bitcoin Trust (GBTC), a closed-end fund holding Bitcoin in custody for its shareholders. The ETF also had a 3.3% weight, or $189 million worth of shares, in the cryptocurrency exchange Coinbase Global (COIN)

Those holdings are a drag on the fund, given Bitcoins hefty losses. Early Tuesday, the cryptocurrency tumbled below $30,000 for the first time since January, though it later recovered to about $32,500, for a loss of about 18% over the past week. Coinbase is down 4% over that time.

The ARK Next Generation Internet ETF, though, has risen 4.6% during the same period, with a gain of 1.7% on Tuesday alone. One positive factor is that the Grayscale fund, which was already trading at a discount to Bitcoins price, didnt fall as much as the cryptocurrency itself.

The ARK funds heavy holdings in other innovative internet stocks have limited the damage as well. Its second-largest holding, Shopify (SHOP), for example, has gone up by 14% in the past week. Other major holdings, such as Roku (ROKU), Twilio (TWLO), and Unity Software (U) have gained 19%, 12%, and 13%, respectively.

All those stocks struggled earlier this year as cyclical names gained favor and inflation worries flared up, but they have been on a steady upswing again since mid-May.

Bitcoin is now up just 13% for the year, and has lost more than half its value since hitting its record of $64,829 on the day in April that Coinbase went public. The ARK Next Generation Internet ETF is now just slightly below where it was at the beginning of the year. At its low point for 2021, in the middle of May, the fund was down 16% year to date.

Write to Evie Liu at evie.liu@barrons.com

The rest is here:
This ARK Fund Has a Big Bitcoin Stake. It's Rising as the Currency Falls. - Barron's