Will a Bitcoin ETF Really Get Approved in February?
The Chairman also addressed the many security concerns that are pervasive in the cryptocurreny markets. Unlike traditional markets, cryptocurrencies can be transferred via hacking comparatively easily. With traditional assets, there are clear custody and clearing procedures in place that ensure every asset is accounted for and delivered to the appropriate destination. While this system is slower (2 day settlement) it is more accurate. It is rather difficult for a user to simply send their Apple stock from their account at Fidelity to a random persons account at E-Trade. Even if this mistake did occur, the transaction is relatively easy to reverse. In the digital asset space, there are no checks and balances and no recourse if a user send their Bitcoin to an incorrect wallet address.
Taking security one step further, there is a well know string of exchange hacks since Bitcoins inception. These hacks, combined with no clear custody/clearing solutions recognized by the SEC are the cause of worry among policy makers. While there are a number of companies attempting to solve the custody/clearing issues (PrimeTrust, Coinbase, BitGo and Gemini Custody etc.).
Many of the above are ‘qualified custodians’ for traditional or digital assets and are leading the way to bringing security to the cryptocurrency industry. It is my hope that the SEC becomes comfortable with these digital asset security methods to allow the formation of not just ETFs, but also the much needed infrastructure to help the cryptocurrency ecosystem grow.