According to Cointelegraph: Chair of the Commodity Futures Trading Commission (CFTC) Rostin Behnam has asserted that the recently approved spot Bitcoin exchange-traded funds (ETFs) might lead to misunderstanding about the adequacy of regulatory provisions for Bitcoin and the broader cryptocurrency market.
During a keynote speech on January 26, Behnam warned that retail and institutional investors could potentially misinterpret the legal permission for spot Bitcoin ETFs, granted by the United States Securities and Exchange Commission (SEC) on January 10, as firm regulatory parameters for cryptocurrencies in general.
The approval allows investors to partake in Bitcoin exposure without directly holding the digital asset, all under the supervision of an SEC-regulated stock exchange. However, Behnam voiced concern over the absence of regulatory oversight for the cash market of digital assets, such as cryptocurrency exchanges.
Behnam emphasized that this lack of regulatory pillars to address "opaque and inconsistent practices in the cash markets for digital assets" could negatively affect Bitcoin ETFs' transparency, as asset management firms obtain the underlying assets for the ETF from the cash market.
He highlighted critical areas of concern, including trade settlement, conflicts of interest, data reporting, cybersecurity, customer protections, transparency, and overall market integrity.
Behnam described the situation in a vivid metaphor, stating, "The ETPs have taken a speculative and volatile asset, wrapped it in a thin layer of indirect regulation, and packaged it as a shiny new product."
CFTC Commissioner Caroline Pham has also previously advocated for a limited pilot program to address cryptocurrency regulation, warning that lagging in regulatory measures could make the U.S. bow to other crypto-friendly jurisdictions. The upcoming U.S. presidential election in November also brings anticipation for enhanced regulatory clarity for the crypto industry.