The potential for bitcoin price manipulation is the major deterrent to its trading on a major exchange, says SEC chairman Jay Clayton.
Clayton made the sobering remarks in New York at the Delivering Alpha conference.
Clayton said bitcoin investors are deluding themselves if they think the cryptocurrency market is as transparent as equities trading on the stock market is.
“If [investors] think there’s the same rigor around that price discovery as there is on the Nasdaq or New York Stock Exchange, they are sorely mistaken,” Clayton said. “We have to get to a place where we can be confident that trading is better regulated.”
Jay Clayton: Bitcoin is not ready for prime time yet
For the past two years, the crypto industry has been clamoring for bitcoin to go mainstream. However, Clayton dashed those hopes, suggesting the budding market is not ready for prime time yet.
Jay Clayton’s latest bearish remarks echoes his sentiments from two weeks ago, when he warned that more work needs to be done to ensure transparency in the crypto ecosystem.
Specifically, Clayton said the SEC cannot approve a bitcoin ETF (exchange-traded fund) until custody issues are resolved and there are more safeguards against price manipulation.
“How do we know that we can custody and have a hold of these crypto assets?” Clayton told CNBC. “That’s a key question. An even harder question — given that they trade on largely unregulated exchanges is — ‘How can we be sure that those prices aren’t subject to significant manipulation?”
Trump: ‘I’m not a fan of bitcoin or crypto’
Clayton’s skepticism toward bitcoin mirrors the sentiments of President Donald Trump.
In July, Trump said he is “not a fan of Bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.”
The President also expressed concern that “unregulated crypto assets can facilitate unlawful behavior” such as money-laundering, drug trafficking, and terrorism financing.
Like other lawmakers on Capitol Hill, Trump is worried that cryptocurrencies like bitcoin could undermine the U.S. dollar.
Lawmakers: Crypto will undermine the U.S. dollar
President Trump’s apprehension about bitcoin is one of the few times that he and Congressional Democrats have agreed on a policy position.
Democratic Congresswoman Maxine Waters, the chair of the House Financial Services Committee, is leading the charge in Washington against Facebook’s cryptocurrency project called Libra.
Waters has urged Facebook to stop work on Libra, saying the social media monopoly is trying to operate like an unregulated nation-state with its own currency.
Maxine Waters: Facebook wants to act like a nation-state
In a statement, Maxine Waters pointed out that “Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data.”
Accordingly, Waters said Facebook should not be trusted with the confidential financial data of millions of people:
“Facebook is continuing its unchecked expansion and extending its reach into the lives of its users. The cryptocurrency market currently lacks a clear regulatory framework to provide strong protections for investors, consumers, and the economy.”
Similarly, California Democrat Brad Sherman called for an outright ban on all crypto, saying it will undermine the U.S. dollar.
“An awful lot of our international power comes from the fact that the U.S. dollar is the standard unit of international finance and transactions,” Sherman said in July 2019.
Congressman Sherman continued:
“It is the announced purpose of the supporters of cryptocurrency to take that power away from us, to put us in a position where the most significant sanctions we have against Iran, for example, would become irrelevant.”
“So whether it is to disempower our foreign policy, our tax collection enforcement or traditional law enforcement, the advantage of crypto over sovereign currency is solely to aid in the disempowerment of the United States and the rule of law.”
Trump supporters Peter Thiel & Mick Mulvaney are bitcoin fans
On the flip side, Trump supporter Peter Thiel is a bitcoin fan. In 2018, Thiel — the billionaire co-founder of PayPal — referred to bitcoin as “digital gold” and said crypto is probably the wave of the future.
In 2017, Thiel’s Silicon Valley venture capital firm, the Founders Fund, bought $15 million to $20 million worth of bitcoin.
Mick Mulvaney, the White House budget director, is another bitcoin bull in the Trump administration.
He co-founded a bipartisan group called the Congressional Blockchain Caucus that seeks to promote crypto use at the federal legislative level. Mulvaney has reportedly been a bitcoin fan since 2014.
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