The Securities and Exchange Commission has buckled its belt and is currently working on regulations that could at some point in time allow crypto versions of ETFs.
Mr. Jay Clayton, Chairman of the Securities and Exchange Commission was recently in a conference on innovation and regulation of digital assets. In the conference, he said that the agency was working with many other financial regulators such as the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission to analyze who has regulatory jurisdiction over different crypto products. He also mentioned that as long as crypto goes attempts are being made to change the reputation of the agency and stance on crypto. A lot of people do believe that the SEC might be targeting organizations in the crypto industry. But Clayton has made it clear that it will clear its stance.
“If you’re talking about . . . the tokenization of ETFs,” Mr. Clayton said, “We should drive that, and we’re willing to drive that.”
When we talk about tokenization, it calls for a designated crypto-asset on the lines of bitcoin that is to represent a single stock or a bouquet of securities or something like an ETF. Many firms have risen to the occasion and are now experimenting and discovering more and more about this idea.
Last year the noted investment company Franklin Templeton filed paperwork with the SEC to come up with a government money market fund whose shares would be tokenized. This was proposed on the Stellar Blockchain but investors could also invest in traditional fund shares. The fund has not yet seen the light of the day.
Tokenized funds have great potential because it allows for real-time trade settlement, promotes liquidity, and also has a great trail for future reference. WisdomTree also has bet big on it and it is leading a VC funding round of secure token developer Securrency. Chief executive Jonathan Steinberg believes that tokenized investments are an opportunity to do something better than the ETF.”
Clayton also said that early pioneers did not bother to look at this approach.
One of the problems we’ve had was [that] we got off on the wrong foot in this innovation,” he said, adding that some thought the innovation was so efficient, “we could toss aside some of those principles of responsibility or transparency”.
In the era of the infamous ICO, the SEC had investigated companies especially with respect to the regulation and compliances. Clayton has encountered organizations that tried to dodge the SEC and talk them out of being so law-oriented. But the SEC won’t budge because it is people’s money under jeopardy.
Mr. Clayton also did not address the repercussions of the different proposals to launch ETFs that invested in bitcoin and other cryptocurrencies through direct means or through future contracts.
WisdomTree’s head honcho also believes that the regulatory process has to be the way it is and that nothing can be fast-tracked. But he did mention that back in the 1990’s SEC procedures and filing did take a toll and it was a long journey back and forth between the agency and the stock exchange before the ETFs went on the floor.