A recent report by New York Attorney General Barbara D. Underwood’s office indicates some cryptocurrency exchanges are vulnerable to manipulation, a finding that some market observers believe could be a blow to bitcoin exchange traded funds winning regulatory approval.
Last month, nine Bitcoin-based exchange-traded fund (ETF) applications got the thumbs down from the Securities and Exchange Commission on Wednesday, preventing the digital currency from gaining more acceptance from investors who are wary of the unregulated exchanges of cryptocurrencies. The SEC’s Division of Trading and Markets rejected applications from investment firms ProShares, Direxion and GraniteShares.
The SEC stated, “Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.”
Related: A Concerning Bitcoin Price Prediction
Earlier this year, the New York attorney general’s office unveiled the Virtual Markets Integrity Initiative in an effort to bolster accountability and transparency across the cryptocurrency platforms retail investors use.
“The report finds that virtual asset trading platforms have yet to implement serious efforts to monitor and stop abusive or manipulative trading,” according to the report. “Few platforms seriously restrict, or even monitor, the operation of ‘bots’ or automated algorithmic trading on their venue. On the contrary, most platforms seem to cater to professional, automated traders – with many venues offering special pricing and other features to such traders, leaving retail customers at a disadvantage.”
VanEck, SolidX Patiently Waiting
The SEC recently postponed their decision on a bitcoin ETF until late September. The ETF filing by investment firm VanEck and blockchain technology company SolidX could help reticent investors adopt Bitcoin as a legitimate investment opportunity if approved. Some market observers believe it will be 2019 before a bitcoin ETF is approved in the U.S.
The New York attorney general report also highlighted several conflicts of interest at digital currency brokers, including trading their own accounts, employees trading on their venue and exchanges accepting compensation for listing a digital currency.
“There are often no objective standards for listing particular virtual currencies, leaving serious questions about the elevation of particular virtual currencies over others on certain venues,” according to the report.
For more information on the cryptocurrency market, visit the Bitcoin category.