Former SEC Chair Shows How a Bitcoin ETF Could Be Approved

• Investors believe a spot Bitcoin ETF will grant them access to the asset without having custody of it.
• Clayton refused to predict when the US would see a spot Bitcoin ETF.
• Clayton is widely known for filing a lawsuit against Ripple Labs during his time as SEC chair

Former SEC Chairman Jay Clayton has dived into the ongoing conversations about a spot bitcoin ETF in the US. During an interview with CNBC, Clayton remarked that regulators would find it hard to not approve a spot Bitcoin ETF if the product served a similar function as a futures one

Clayton noted that applicants for a spot bitcoin ETF have to demonstrate that it’s a more effective and efficient alternative for investors to purchase the digital asset. He noted that “if they’re right that the spot market has similar efficacy to the futures market, it would be hard to resist approving a bitcoin ETF.”

“I was very skeptical with trading in the #bitcoin market when I was SEC Chair,” says Jay Clayton. “But if you can demonstrate that the spot market has similar efficacy to the futures market, it would be hard to resist approving a #bitcoin ETF.” pic.twitter.com/mig05ZUwIL

— Squawk Box (@SquawkCNBC) July 10, 2023

The SEC has rejected multiple Bitcoin ETF applications, citing a lack of transparency and concerns about protecting investors from the unregulated spot market. Clayton offered further insight into the SEC’s reasoning, comparing it to how the regulator approved futures ETFs in the past. He said,

When the SEC approved a futures-based ETF, they said, ‘let’s look at the futures market; we see the surveillance; we see the protections in that market for the investor that are sufficient. We don’t see them in the spot market, so we’re going to make that distinction.

Interestingly, Clayton oversaw the SEC’s denial of three prior applications for bitcoin spot ETFs and is currently a senior policy advisor in private practice at the global law firm Sullivan & Cromwell. Despite his surprising revelation, Clayton avoided predicting when a spot bitcoin ETF might receive approval.

He, however, confessed to having concerns about Bitcoin during his time with the SEC. Clayton said his core concerns were the possibilities of wash trading and market manipulation

Clayton also recognized the significant progress the crypto sector has made, notably in the area of institutional investment. Global brands and organizations are already embracing Bitcoin, demonstrating an increased level of confidence.

“The fact that we have these institutions that know markets better than anybody and are saying we’re going to put our reputation behind it, I find that pretty remarkable,” Clayton further said

Clayton is widely remembered as the SEC chairman who led the agency in filing a lawsuit against Ripple Labs Inc., its co-founder Chris Larsen, and its CEO Brad Garlinghouse in 2020. However, his advisory role at Fireblocks seems like a change of heart