Future of Cryptocurrencies Clear as Mud

Future of Cryptocurrencies Clear as Mud

Cryptocurrency enthusiasts are renowned for their devotion to Bitcoin and other forms of virtual money. Lately though, regulatory authorities haven’t given them much reason for excitement.

Securities and Exchange Commission (SEC) Chairman Jay Clayton came off as anything but enthusiastic about discussing the future of Bitcoin and other cryptocurrencies in a November interview on the subject with New York Times columnist and author Andrew Ross Sorkin. Clayton repeatedly dodged Sorkin’s questions with non-committal responses, including when Sorkin asked if the SEC shared Warren Buffett’s dim view of Bitcoin. The Berkshire Hathaway CEO has dismissed Bitcoin as “probably rat poison squared” because it lacks “intrinsic value.”

Instead of answering the question directly, Clayton used the opportunity to send a message to cryptocurrency companies: You have to conform to the SEC’s rules, not the other way around.

“My view is that our rules have stood the test of time very well,” he said. “We should not change them to adapt to technology. Technology ought to be able to fit within our rules.”

Meanwhile, the possibility of introducing a cryptocurrency exchange-traded fund (ETF) continues to intrigue some in the investing world. An ETF is widely seen as a way to give cryptocurrencies greater gravitas.

Famed investing twins Cameron and Tyler Winklevoss have championed the cause, but the SEC earlier this year thwarted their effort to list a bitcoin ETF. Interestingly, however, the agency didn’t shut the door altogether on listing a similar product in the future.

“Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether Bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment,” the SEC wrote in its decision. The SEC added that “regulated bitcoin-related markets are in the early stages of their development,” meaning that new developments in the maturation of the markets could lead the agency to re-evaluate its decision on a similar ETF in the future.

If that sounds to you like the Wall Street watchdog is leading on cryptocurrency aficionados, you’re probably correct. Hester Peirce appears to be one of the strongest advocates for cryptocurrencies among the SEC commissioners, maintaining a belief that cryptocurrencies will gain credence as institutional assets over time. Yet, even she has advised those hopeful for the listing of a cryptocurrency ETF not to “hold your breath” waiting around for it to happen.

So, are cryptocurrencies on the verge of becoming mainstream investment vehicles, or will they carry on as shadowy alternatives in the investing landscape?

The talk from SEC officials suggests we’ll soon look at Bitcoin and the like the same way we view stocks and bonds – unless we don’t.

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