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A man and a woman, a Republican and a Democrat, a lawyer and an economist, longtime political rivals. Meet the two SEC commissioners who will decide whether to approve or reject the bitcoin ETF.

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Dr. Michael Piwowar is a rare specimen, so being the only trained economist among a chamber full of lawyers at the SEC. He earned a Ph.D from Penn State University, served in President Obama’s Council of Economic Advisers and then became slightly more political, joining as a staffer for Republican Senators, not unlike Kara Stein, the second commissioner, who was an aid to a Democratic senator.

Dr. Michael Piwowar

Piwowar appears to have been introduced to the blockchain around July 2016. In a speech at the Quadrilateral Meeting in London, he briefly mentions it by name, stating he learned from the “discussion of blockchain technology and virtual currencies,” then swiftly moves on to banking regulations, but not before stating that he was pushing for a FinTech roundtable.

That roundtable was held in November 2016 when Piwowar remarked that “our financial regulatory structure is a fragmented, sometimes contradictory, alphabet soup.” He urged the SEC to take a leading role, stating “[t]he great potential of FinTech should not be hindered by our current regulatory structure,” before adding:

“[T]he Commission should take the lead regulatory role in the FinTech space. Many of the firms pursuing FinTech are already SEC registrants, and others are providing services that are squarely within the Commission’s oversight, such as investment advice and trading and settlement functionalities. And we are the only agency with a mission that explicitly includes facilitating capital formation. In that regard, our recent crowdfunding initiatives provide us the relevant experience and expertise for understanding the regulatory challenges.”


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It appears fairly obvious the commissioner is a big fan of the wider Fintech space. Whether that extends to bitcoin, specifically, is not very clear. However, it appears likely that, regardless of the commissioner’s own views on bitcoin, he probably will lean more towards giving the market freedom to trade and thus approve the ETF.

Kara Stein

The second commissioner, Kara Stein, has a more traditional background for the SEC. A Yale law graduate, and a Democrat, Stein appears to have been aware of bitcoin as early as November 2015, and probably earlier, when she gave a speech at Harvard Law School on technology innovation, including blockchains. Striking a somewhat cautious tone, Stein says:

“For every innovation promising benefits, there are potential uncertainties and drawbacks.  The Commission and market participants should be working together to surf this wave of innovation, rather than being overcome by it.”

Except for mentioning bitcoin by name, Stein says little, if anything, regarding the digital currency, but appears to have a somewhat favorable view of blockchain technology. Stein states:

It could be used to overhaul areas like securities clearing and settlements, payment processing by banks, and cumbersome loan transactions. It has the power potentially to increase quality and facilitate trust.

In particular, Stein appears to believe that blockchain technology can add transparency and thus potentially increase the effectiveness and enforceability of regulations. Stein says:

“While I am not advocating for the adoption or effectiveness of blockchain technology, it appears to offer potential. One can imagine a world in which securities lending, repo, and margin financing are all traceable through blockchain’s transparent and open approach to tracking transactions. That could revolutionize regulators’ approach to monitoring systemic risk in these areas, including the oversight of collateral reuse, to name just one potential use.”

How Will They Likely Decide?

The SEC’s treatment of the currency might be indicative of the wider regulatory attitude by the United States. So far, they have been very restrictive, especially when compared to UK. Regulated exchanges, such as Coinbase and Gemini, for example, are still not allowed to provide margins or futures for no apparent reason.

The new administration might usher in a new attitude and there are some indications that might be the case. Piwowar, the current SEC acting chairman, appears favorable to this space, using a language more at home with UK regulators than US regulators when describing the Fintech industry. His attempts at further clarification regarding crowdfunding rules are also helpful. One hopes he continues further, especially in the context of eth based ICOs.

As such, although it is difficult to fully judge, it appears he is probably more in favor of approving, rather than rejecting, the ETF, so leaning towards giving the market greater freedom, especially considering that decisions on whether to invest on the ETF would probably be made with the aid of experienced and sophisticated brokers/advisors.

Stein, on the other hand, uses the more traditional US regulatory language which often emphasizes responsible innovation, implying in a subtle way that we are somehow irresponsible. It’s difficult to say what her views are on the Bitcoin ETF, but if I was a betting man, I’d say she leans more towards rejection.

However, a vote for rejection would probably be a very difficult decision for either of the two commissioners, unless there is a very good reason, as this is a significant event and would probably act as an indication of how US authorities now view this space.

After their double taxation with the IRS, the disastrous BitLicense, their continued refusal to allow very responsible exchanges to provide margins and futures, another blow by US regulators would probably invite calls for responsible regulations. As such, Stein might heed her own words:

“Just like the role we played in the development of the Internet, the U.S. should strive to be at the center of how the new financial market is framed and regulated.  We are at a similar moment in time for financial markets. If we do not lead, someone else will.”

That someone has been the UK on the regulatory front and China in regards to margins and futures trading, but, American citizens have driven much of this innovation, therefore, we’d all like them to benefit and enjoy responsible regulators.

Whether they will be able to, in regards to the ETF, rests solely on these two individuals who have to decide whether they will lead or whether they will instead continue to send the new generation’s innovation away. We could find out at any time, with a conclusive decision no later than 11th of March, now just under two weeks.

Images from Shutterstock and the SEC.

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