Former SEC Official Warns Against Spot Bitcoin ETFs, Anticipates “Epic” Investor Scam

A former Securities and Exchange Commission (SEC) officer expressed doubt about the possibility of spot bitcoin exchange-traded funds (ETFs) receiving clearance from the SEC. Spot bitcoin ETFs might result in a big Wall Street investor swindle if they are allowed, according to a warning from former SEC chief of internet enforcement John Reed Stark.

Stark, who is presently the president of cybersecurity company John Reed Stark Consulting, recently posted on social networking site X about his concerns with the approval of spot bitcoin exchange-traded funds (ETFs). He contended that the launch of spot bitcoin ETFs will probably lead to a significant Wall Street investor swindle, calling it a “epic” event, based on his vast expertise at the SEC.

In his analysis, Stark emphasized the centralized structure of spot bitcoin ETFs in addition to the possibility of financial exploitation through fees. He called the idea of an exchange-traded fund (ETF) for bitcoin “laughable” and highlighted the inherent hazards of a centralized crypto instrument of that kind.

Centralization Concerns

The main focus of Stark’s criticism is the potential degree of centralization that spot bitcoin ETFs may bring about in the cryptocurrency market. The old Wall Street financial system, where fees and frauds have been common, is the source of the fear. If authorized, Stark contended, the concept of a bitcoin spot ETF may constitute one of the most centralized crypto systems imaginable.

Thirteen applications for spot bitcoin exchange-traded funds (ETFs) are presently being reviewed by the SEC, which has recently had talks with applicants. Stark emphasized that the SEC is currently investigating other ways to identify bitcoin exchange-traded funds (ETFs), as seen by the regulator’s preference for the cash-creation technique over the in-kind creation option.

Stark stated that he thought it was likely that some sort of bitcoin spot ETF will be approved based on recent meetings between SEC representatives and issuers of spot ETFs as well as conversations regarding the cash generation process. Given the unusual nature of the cryptocurrency market, Stark finds it rather odd that the approval of a bitcoin spot ETF might end up being a major part of SEC Chair Gary Gensler’s legacy.

In closing, Stark expressed his unwillingness to concede that a spot bitcoin ETF would be approved and end up being a major focus of Gensler’s term. The former head of SEC’s internet enforcement division expressed his doubts on the approval’s reverse nature given the state of the cryptocurrency market.