The Breakdown - Will there ever be a BTC ETF? / CFTC says ETH a commodity / Binance accepts Alipay/WeChat pay...sorta

Episode Date: October 10, 2019

The SEC has denied the most recent bitcoin ETF proposal - this time from Bitwise. Some speculate that there simply will not be an ETF on Chairman Clayton's watch. The CFTC chair meanwhile has said that the CFTC considers ETH a commodity and expects futures and other derivatives products. Finally, Binance's acceptance of Alipay/WeChat pay as a fiat onramp has prompted those companies to reiterate their anti-crypto stance.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another crypto daily 3 at 3. What's going on, guys? Happy Thursday, October 10th. Today we're going to be looking at the SEC denying a Bitcoin ETF yet again, what it means, what it suggests for the likelihood of an ETF. Number two, we're going to be looking at comments from a different division of government, the CFTC chairman, saying that Ethereum, specifically Ether, is a commodity, not a security, and he anticipates futures soon and other derivative. products. And finally, we're going to look at Binance accepting using AliPay and WeChat pay as

on ramps, sort of, which just shows kind of the confusion of crypto and the China markets. So let's start with the SEC. ETF, it's been the, you know, the initials of the last 18 months is when is a Bitcoin ETF coming? When's a Bitcoin ETF coming? And again and again and again, it's been denied. Most recently, we talked about how Vannick had withdrawn its proposal. And and actually kind of just decided to not fight the good fight this round, basically decided that they didn't want to get a disapproval. Bitwise, who you may remember as the folks behind the big Bitcoin transparency or exchange transparency survey, right?

So Bitwise has done a lot to try to show the SEC that you're able to go out and see what parts of the market are above board versus what parts aren't and you can detect it and you can build on that foundation of kind of the real infrastructure who's doing real things versus kind of the wash trading and all that. So Bitwise decided to kind of fight on through and accept whatever happened with this most recent proposal. And so less yesterday BitWise tweeted out. They said earlier today, the SEC issued a 112 page order disapproving at NYSE filing for

the Bitwise Invest Bitcoin ETF trust. Though disapproved doesn't seem positive, this is a productive step in the journey to a regulated crypto ETF. And so basically the idea here is that it was a NYSE-Arca proposed rule change to list and trade shares of the Bitwise ETF. The SEC just basically doesn't buy that the market is not manipulated, right? So Jake Chavinsky and the Legal Corps jumped into this. Jake says the SEC has rejected Bitwise's Bitcoin ETF proposal.

While the outcome is no surprise, the SEC went beyond the call of duty, issuing an excruciatingly detailed 112-page order that reads like a damning indictment of Bitcoin's market structure. See here. Some interesting comments here. So Nomad says, reading the comments that there's only a single person out of, say, 40 right in. The rest reads like crypto-Twitter whining on both sides of the argument. I think the only way something is going to pass at this right is if somebody believes enough in it to Sue. So what's going on here? Well, in Jake's estimation, this is another tweet of his,

he says at this point, it's reasonable to assume that Jay Clayton's SEC will never approve a Bitcoin ETF. His term ends on June 5th, 2021, but could go another 18 months longer. Usually we'd see new ETF proposals filed immediately after rejection, but this time, but it might be time to take a year off. And he goes on and he says, to get ETF approval anytime soon, the SEC would have to change its views on how sponsors can satisfy the Exchange Act. Chairman Clayton supports the current view that Bitcoin is susceptible to manipulation and surveillance, sharing agreements with regulated markets are required. So this gets back to basically what BitWi says is why.

They say, as context, we could have withdrawn the filing to avoid a disapproval order. We didn't because it is productive. So basically, the idea here is that they're hoping that people pour through this 112 page order disapproving that filing and figure out how better to do it. Now, Jake is more pessimistic and basically thinks that there's no chance that it happens on Jay Clayton's watch. Pomp says, ever the optimist, reminder, the Bitcoin ETF will eventually get approved, not a question of if but when. So, you know, that's just the latest in the Bitcoin ETF saga. Nothing now, nothing new, and maybe nothing for a while depending on who you listen to.

But with that, let's move on to another section of government, the CFTC. So a bunch of tweets kind of signaling this coming out. So Brian Kelly from CNBC says, very big news. CFTC Chairman confirms ether cryptocurrency is a commodity. Over here we've got Lil Moon Lambo, who has a gift showing just exactly how excited the market might be for this. The CFTC says ETH is a commodity and expects Ethereum derivatives to be open for trading in the U.S. soon. For those of you who are listening, not watching, there's basically a, touchdown give. Dutas over from the block says this is a massive quote from a critical U.S.

financial regulator. This is a quote directly from Chairman Heath Tarbert of the CFTC. I want to stress the importance of blockchain and digital assets to the United States. And in particular, as CFTC chairman, I want the U.S. to lead in this technology. So if you go in and actually look at the set of comments, it's from the Yahoo Finances All-Market Summit, they say this is the the same, this is Tarbert, the CFTC chair. He says, we've been very clear on Bitcoin. Bitcoin is a commodity. We haven't said anything about ether until now. It is my view as chairman of the CFTC that ether is a commodity. So this is a big deal, obviously, right? And this isn't necessarily different than what we've seen before. It's been indicated to us that the SEC, for example,

thinks that ether is a commodity versus a security, or at least that Bitcoin and Ethereum are not securities. We saw that last year. But I think that this is a very clear, very intentional way to comment on this. And what it suggests is that there's potential for derivative products, futures, for example, that can be, you know, executed in a regulated way, in a compliant way. So a couple of different pieces of feedback, I guess. This is obviously a huge deal in the same way that futures products for Bitcoin function as a really powerful price discovery mechanism, a way for traditional financial institutions to get involved and dip their feet in in a way that they understand. Same could be true for ether. I think then the question, though, is what are

the implications for other assets potentially? And again, going back to the kind of the crypto-twitur legal core, the answer might be not that much, right? So Jake Trevinsky again, he's all over this one. That's what happens when you've got multiple sets of government commenting on things, says, the CFTC calling ETH a commodity has nothing to do with securities law at all. Securities are a type of commodity. Financial instruments can be one, both, or neither. Not to mention that the SEC already said ETH isn't a security last summer. Preston Byrne kind of built on top of this, and he says,

the CFTC chair declared Ethereum a commodity today, all but driving a stake through the heart of Bitcoiners who had hoped it would be declared a security. Here's why lawyers shouldn't advise their clients to go out and launch Ethereum 2.0. And the simple point about this, the core idea is that these assets don't necessarily exist in one state or another, right? They're almost like Schrodinger's securities, right? They're if they're commented on, their securities, but if not, they might not be. And really what it is is that something that is a commodity later that is not a securities offering anymore might have been offered as a security, right? The offering itself might have constituted an offering of a security.

That's a lot of what it seems like the SEC is parsing through going after different. tokens and why they're settling. That was the implication that we saw a lot of lawyers feel came out of the EOS settlement from last week was this idea that, you know, the EO settlement, to be clear, did not indicate whether the SEC in any explicit way thought that EOS currently existed as a security, but there are many, including Jake Trevinsky, who we just heard from, that really thought that that that was the intimation, right, that when it was offered as a sale, it constituted a securities offering, but that it may not be a security now for whatever reason, right? Sufficient decentralization, no expectation of whatever it is.

But this idea that something could be a security and then not, really what it comes down to is when you go out and build something and launch something, that's the time that it's most likely to be a security. So even though we're seeing this kind of clarity around ether, that doesn't mean that we can kind of ascribe that same clarity to other assets. You've got to think it's good news for the Ethereum community and for people who are excited about Ethereum. And it's good news for people who are interested in these traditional financial products coming into the crypto world. But with that, let's move on to the last topic for today, which also kind of involves old and new world.

So Fiat on ramps are obviously a huge deal. How people get their money from fiat dollars into cryptocurrency is a big issue. It's a blocker for mass adoption. It's a blocker for just lots of types of adoption and hold the side mass. And so news started to circulate that maybe there was a new Fiat on ramp with Binance, right? So this tweet from Monday, or sorry, from Tuesday it looks like, is Binance now accepting Fiat on ramp with Ali Pay and WeChat Pay. Exciting news would love for someone to confirm this Twitter poster, Celine Liu,

tag CZ from Binance and with a picture of kind of a, it looks like a screenshot of Binance's app, indicating a bank card, a Ouiche, and an AliPay option. ZZ Binance says yes. So tons of people were excited, right? You have CoinDesk writing, Binance now accepting Fiat through Alipay, WeChat. But if you scroll down just a little on this big yes that has one and a half thousand likes, AliPay says, no, you cannot. And they go to their own thread that says there's several reports about Alipay being used

for Bitcoin transactions. to reiterate, AliPay closely monitors over-the-counter transactions to identify a regular behavior and ensure compliance with relevant regulations. If any transactions are identified as being related to Bitcoin or other virtual currencies, AliPay immediately stops the relevant payment services. So what's going on? Let's turn over to Dovi, who was posting some of the kind of official statements from Waybo. So she says,

AliPay officially reaffirmed its, quote, prohibition of cryptocurrency OTC trading on its Waybo today. auto translation below. Starting from August, China OTC market has been slowing down quite a bit due to various action taken by both payment channels and local police. WeChat Pay also provided followed up with an announcement to reassure, quote, WeChat will never support cryptocurrency trading and has never integrated with any crypto merchant. And it says, we welcome any whistleblower to report such behavior. She says, and this goes on, I personally think it's Binance OTC announcement that claimed support

for WeChat and AliPay that triggered such a declaration. of innocence from WeChat and AliPay. A buddy who has OTC traded a few times got this error when he tried to buy coffee today. So there was another thread that I thought was really valuable and actually CZ referenced himself in a pomp thread that we'll get to just in a minute or a pomp tweet. And he says, so this is a truth seeker on Twitter. For those who don't understand China and AliPay, Chinese government is negative on Bitcoin, positive on blockchain.

Blockchain, want to issue its own digital currency to compete with Bitcoin. and Libra and push R&B world dominance, but they do allow citizens to own and hold Bitcoin. AliPay and WeChat are basically state-owned. They must act accordingly or they will get punished. There have already been many other smaller exchanges in China doing peer-to-peer Bitcoin trading using Ali-P and WeChat. No one really cared. But Binance is too famous.

They launched P-to-P and this was blown out of proportion. All the media both East and West are covering it. Now, what can Ali-Pay do? They must show their stance and determination immediately, deny it. Truth is, people don't label buying Bitcoin in their AliPay transactions. And if AliPay over monitors their users, it will just degrade the user experience and force users away. Users either continue at their own risk or use a different payment channel.

What can Binance do now? It's best if they just stay quiet, let it blow over. So don't ask Z any more questions. Instead, look up what P2P means and judge for yourself. So this was shared when Pomp posted, AliPay is going to ban any transactions related to Bitcoin and cryptocurrencies. One possible scenario is that this could be prepped for the launch of a digital UN. If that happens, the U.S. better hurry up and digitize the dollar before being left behind.

CZ says many Westerners understandably misunderstand things half a world away. No sweat. There are smart people in the crowd. I will take the advice and not comment anymore. So basically, he's kind of affirming this idea that it's an open, it's an open secret sort of that people use these channels for peer-to-peer trading and buying and selling a Bitcoin, but that once it gets too close to an exchange, particularly a well-known famous exchange that's previously been banned from China, it gets a little hairy as it relates to that delicate, you know, don't ask, don't tell kind of power arrangement. So interesting stuff, I think particularly interesting that Pomp connects the dots with this idea of the U.S. digital dollar and what, you know,

China's plans for a digital money might be. Because just yesterday we also saw, and I'll leave you hear that Zuckerberg has agreed to testify before Congress later this month, October 23rd, about Libra. Rhythm Trader says, in other news, Bitcoin CEO failed to respond to Congress's invitation. So this should be interesting, right? We just keep seeing the stakes on the global digital currency game rise and rise and rise. This AlliePay, Binance, WeChat pay thing is part of it. Facebook testifying before Congress with Libra is part of it. And it's just going to get more, or not less interesting. But with that, I'll leave you guys. Thanks for watching. Thanks for listening for those of you guys who are on the podcast. And I will be back tomorrow with our final

three at three for the week. Peace, guys.