On 27th August, CNBC interviewed Paul Vigna, a Wall Street Journal reporter who spoke about the state of cryptocurrencies including Bitcoin. The interview included the Securities and Exchange Commission’s [SEC] stance on approving the Bitcoin ETF proposal.
Paul stated that the SEC’s concern about cryptocurrencies was completely valid, having a public transaction ledger where the prices and transactions are recorded is very beneficial but there is still no transparency on who is doing the transaction or the purpose behind it.
Paul also gave an example of the traditional capital markets which are regulated and are continuously monitored. The exchanges themselves regularly watch the market to find any anomalies or risks of manipulation. In spite of all the effort, fraudulent activities have been monitored. He stated:
“The cryptocurrency markets are far more dangerous as there is no transparency or insight into the reason behind all the transactions. There are many instances where market manipulation has been witnessed in Bitcoin and other cryptocurrencies and nobody is clear about the extent to which it is still happening.”
According to Paul, the SEC’s problem is precisely the same, they do not understand the manipulation process and until they find the exact reasoning behind such manipulation, they will not allow ETFs as it would lead to opening up retail markets which might be a problem in the future.
They spoke about Bitcoin’s path in becoming a big catalyst, but a rift was witnessed between the community on the purist view and the custodial view. The former is where individuals download their own Bitcoin client software and have access to their own hardware wallet and nobody can access it. The later is where cryptocurrency exchanges hold the Bitcoin for the individuals. They also control the private keys which hold the Bitcoin. Paul mentioned that many individuals face a tradeoff as they find it easier to put their currency in such exchanges through which they are giving away sensitive information to a third party.
Paul was also asked about the arguments where individuals felt that there were no formal endorsements from major parties like the Central Bank due to which the SEC did not recognize the ETF. Paul replied,
“the whole idea which existed a few years ago where the governments would not have approved such projects is not so relevant in the present and any good government will look at it as something with great potential and would help individuals benefit from it.”
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