SEC Commissioner Criticizes Approval of Spot Bitcoin ETFs

The decision by the SEC to approve exchange-traded funds based on the spot price of Bitcoin is “unjustified and anti-historical,” according to Commissioner Caroline Crenshaw. She stated this in a recent announcement.

“It sets us on the wrong path of neglecting investor protection. I cannot agree that these actions serve our legislative or core mandates, and therefore do not support the order,” she wrote.

Crenshaw believes that product issuers are still unable to prevent fraud and manipulation. This argument was one of the main reasons for the Commission’s rejection of spot ETF applications in previous years, and she sees no reason to abandon it.

She noted that issuers find it extremely difficult to obtain accurate pricing information, as the volume of fictitious trading on unregulated platforms reaches 77.5%, and even major players like Binance or Coinbase face enforcement actions.

The relatively small market volume allows whale traders and large miners to manipulate prices to their advantage, Crenshaw stated, citing known cases.

Regarding the judge’s argument in the Grayscale vs. SEC case, she emphasized that futures and spot crypto ETFs are not the same product. The former are based on derivatives, fully under the jurisdiction of the CFTC. The latter are based on a physical asset traded globally without SEC oversight. Moreover, even in the U.S., financial markets are regulated in a fragmented manner, she added.

Nonetheless, Crenshaw supported Bitcoin as an asset that facilitates the removal of intermediaries, expands access to financial services, and enhances personal freedom.

“I support many goals of the crypto ecosystem. How can one be against freedom and prosperity? […] But if the technology is so revolutionary, why do many of its applications revolve around recreating the existing financial system, except with less regulation, more opacity, less investor protection, and greater risk?” she questioned.

Known cryptocurrency advocate and SEC Commissioner Hester Peirce has previously spoken in favor of approving spot Bitcoin ETFs.

Her colleague Mark Uyeda has often taken a similar stance on digital assets. He generally welcomed the Commission’s approval of spot Bitcoin ETFs but expressed concern over three aspects of the order, including the abandonment of the “significant market” criterion.

The fourth commissioner, Jaime Lizárraga, has not issued any statements regarding the SEC’s decision.

SEC Chair Gary Gensler, ahead of the Bitcoin ETF approval, once again warned of Bitcoin risks. In December, he indicated that “court decisions” influenced the agency’s approach to these products.

Traditional financial institutions have approached the emergence of spot exchange-traded crypto funds in the U.S. market from various positions, ranging from broad access to prohibition.