The crypto industry has been facing increasing pressure from the U.S. Securities and Exchange Commission (SEC), which has been cracking down on some of the largest players in the space. In June, the SEC sued Coinbase and Binance, two of the biggest crypto exchanges, for allegedly failing to register some of their tokens as securities. The SEC claims that these tokens are investment contracts that fall under its jurisdiction and that the exchanges have been offering them to U.S. investors without proper disclosure and compliance.
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According to a report from Reuters, US crypto firms spent a record-breaking $18.96 million on lobbying in the first three quarters of 2023, up from $16.1 million in the whole of 2022.
The report shows that the crypto industry is ramping up its lobbying efforts to influence the regulatory environment and advance key bills that would clarify the rules for crypto firms and foster innovation and growth in the sector.
Many crypto companies have been lobbying for more favourable regulation and clarity from the SEC, as well as pushing for the approval of a spot bitcoin exchange-traded fund (ETF). A spot bitcoin ETF is an investment vehicle that allows ordinary investors exposure to the price moves of bitcoin in their regular brokerage accounts. Unlike bitcoin futures ETFs, which track contracts that bet on the future price of bitcoin, spot bitcoin ETFs would hold actual bitcoin in custody and track its spot price.
Why a Spot Bitcoin ETF Matters
A spot bitcoin ETF would be a game-changer for the crypto industry, as it would:
– Increase the accessibility and liquidity of Bitcoin for retail and institutional investors, who would not have to deal with the technical and security challenges of buying and storing Bitcoin directly.
– Provide more legitimacy and credibility to Bitcoin as an asset class, as it would be regulated by the SEC and traded on major stock exchanges.
– Boost the demand and price of bitcoin, as more investors would flock to the ETF as a convenient and low-cost way to gain exposure to the cryptocurrency.
– Reduce the premium or discount of other crypto products, such as the Grayscale Bitcoin Trust (GBTC), which is currently trading at a 15% discount to its net asset value. A spot bitcoin ETF would offer a more efficient and transparent way to invest in bitcoin, and could potentially convert GBTC into an ETF as well.
How Crypto Companies Are Lobbying for a Spot Bitcoin ETF
The crypto industry has been waiting for years for the SEC to approve a spot bitcoin ETF, but so far, the regulator has rejected or delayed every application. The SEC has cited concerns over market manipulation, fraud, custody, valuation, liquidity, and investor protection as reasons for its reluctance. However, some experts believe that the SEC is warming up to the idea of a spot bitcoin ETF, especially after it allowed several bitcoin futures ETFs to launch in October.
Some of the strategies that crypto companies have been using to lobby for a spot bitcoin ETF are:
Filing multiple applications with different structures and features, such as using different custodians, pricing sources, or insurance providers. For example, BlackRock, the world’s largest asset manager, filed for a spot bitcoin ETF in November with $100K in seed funding.
Engaging with the SEC and other regulators through meetings, letters, comments, and testimony. For example, VanEck, one of the leading applicants for a spot bitcoin ETF, submitted a 49-page letter to the SEC in November addressing its concerns and arguing why a spot bitcoin ETF is consistent with the federal securities laws.
Educating and influencing lawmakers and policymakers through advocacy groups, campaigns, and donations. For example, Coinbase launched a grassroots advocacy campaign in September called “Stand Up For Crypto”, which encourages its users to contact their representatives and urge them to support bills that would provide clarity over which existing financial rules apply to crypto companies.
The crypto industry is facing a critical moment in its history, as it tries to balance innovation and growth with regulation and compliance. The approval of a spot bitcoin ETF would be a major milestone for the industry, as it would open up new opportunities and challenges for both investors and regulators. The crypto industry is not backing down from its fight with the SEC but rather using various tactics to persuade and pressure the regulator to give it a green light. Whether or not these efforts will pay off remains to be seen, but one thing is certain: the crypto industry is not going away anytime soon
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