The Policy Pulse: 14 August 2023

Welcome to the The Policy Pulse, your go-to source for the latest developments in the crypto and blockchain industry, policy, and regulatory landscape. 

SEC Delays Bitcoin ETF Applications

On Friday, the SEC extended its review of the Ark 21Shares Bitcoin exchange-traded fund (ETF) application. In an official order, the SEC has invited public input on the ETF proposal, a step which will delay the final decision for several weeks. The general public will have three weeks to provide feedback on the proposal, followed by an additional five weeks to respond to the initial comments received.

Ark Investment Management and 21Shares have been pursuing ETF approval since 2021. After an initial rejection by the SEC, they resubmitted their Bitcoin ETF applications earlier this year. The SEC’s past rejections were based on concerns about market manipulation and insufficient safeguards for investors against negative activities.

The lastest Ark 21Shares Bitcoin filing asserts that the concerns about potential manipulation, previously raised by the SEC, have been adequately addressed, with investor protection taking precedence.

Approval of the ETF would enable a broader range of investors to access and trade Bitcoin’s value without needing to directly hold the digital asset itself. Cathie Wood, CEO of Ark Invest, this week said she anticipates that the SEC will eventually approve multiple ETF applications simultaneously. 

SEC Seeks Appeal in Ripple Case

This week the SEC also filed a motion seeking permission to file an interlocutory appeal in the ongoing legal battle against crypto company Ripple. The request focuses specifically on the judge’s understanding of Ripple’s sales of XRP on exchanges and other distributions (e.g. employee remuneration and grants to third-party app developers). 

Read the full story here.

Bittrex Settle for $24M

Also, this week, crypto exchange Bittrex and former CEO William Shihara settled with the SEC over charges of operating an unregistered securities exchange, broker, and clearing agency. 

The SEC alleges Bittrex provided services to U.S. investors involving crypto assets as securities without proper registration. Shihara supposedly instructed issuers to remove statements that could question the assets’ status.

The settlement, pending court approval, imposes injunctions and requires Bittrex and Bittrex Global to pay $24 million, covering disgorgement, interest, and penalties.

Federal Reserve Gets More Oversight of Banks in the Crypto Industry

The U.S. Federal Reserve announced last week that it will be broadening its oversight of banks involved in the cryptocurrency and blockchain sector. The facts in brief:The Fed’s oversight will extend to banks providing financial services to crypto companies and those collaborating with companies using blockchain/DLT.

See Also

Ripple CEO says US regulators “adding confusion” to the crypto marketplace

The regulations are applicable to both insured and uninsured U.S. banks under Fed supervision.The program covers various activities, including custody, lending, trading, and issuance of cryptocurrencies, including stablecoins.

CBDC News This Week…

Over the past number of months, there’s been a marked increase in the number of countries and institutions testing CBDCs. This week there were a number of notable developments:

• A recent Bank of Canada paper poured some cold water on the oft-cited idea that CBDCs would improve financial inclusion. The paper essentially argues that financial inclusion is not really an issue in Canada anyway, so nothing would be gained from the introduction of a CBDC in this respect. It said: “Most consumers face few payment gaps or frictions and therefore might have relatively weak incentives to adopt and – especially – to use CBDC at scale”.
• Belarus became the latest country to announce they hope to launch a CBDC in the next few years. 
• Layer 1 blockchain Aptos announced that it will partner with tech giant Microsoft to explore the use of Web3 onboarding tool Aptos Assistant. The collaboration will focus on a number of use cases, including CBDCs.