• Chairman of the SEC, Jay Clayton, shared his thoughts about the lack of protection in cryptocurrencies
• SEC has already rejected multiple applications for a cryptocurrency exchange-traded fund or ETF
• The agency is also working on eliminating cryptocurrency fraud by enacting security rules

Securities and Exchange Commission Chairman, Jay Clayton, says that he wants to see improved investor protection and better market surveillance. Without these key upgrades, he will not be comfortable with a Bitcoin exchange-traded fund (ETF) anytime soon.

Market Manipulation and Theft loom large for the SEC

In a New York conference last Tuesday, the SEC chairman shared his concern as to how cryptocurrency can be easily manipulated and stolen. He wants these issues to be addressed first before SEC allows an ETF to push through. During an interview with Silver Lake co-founder Glenn Hutchins, Clayton said:

“What investors expect is that the trading in that commodity that’s underlying the ETF is trading that makes sense, is free from the risk or significant risk of manipulations. Those kinds of safeguards don’t exist in many of the markets where digital currencies trade”

SEC has already rejected several bids to list Bitcoin-based ETFs in recent months. This step has disappointed the backers as many of them are seeing the ETF issuance as an important step to encourage more investors. Moreover, agency staff members have shared the worries about the possibilities of manipulation in this unregulated market.

Cryptocurrency Fraud

The SEC has used several enforcements in order to act on the ICO market’s growing fraud cases. The head of SEC’s corporation finance unit, William Hinman, said that the agency will issue more guidance on when laws on securities will apply to cryptocurrencies. The SEC has penalized multiple cryptocurrency projects that failed to do so. Earlier in November, the agency announced its first civil penalties against founders who did not register new coin offerings, adding to its crackdown aimed at abuses and outright fraud in the growing digital industry.

Any cryptocurrencies seen by the SEC as securities will have to register with the agency and pass the Howey Test. SEC has already penalized various cryptocurrency projects that failed to register and pass the test. This month, SEC has even announced their first civil penalties on founders who failed to register their coin offerings. This event has reinforced their efforts to crack down on outright fraud in the industry.