Serendipity and Self-Regulation: The Case of Cryptocurrency-Based ETPs

Abstract

This Essay uses the recent approval of bitcoin and ether-based exchange-traded products (ETPs) by the U.S. Securities & Exchange Commission (SEC) as a case study for how rulemaking by self-regulatory organizations has the potential to reveal elegant compromises to intractable legislative and regulatory dilemmas. Specifically, the bitcoin and ether-based ETPs evolved organically from decades of negotiations between regulators and self-regulatory exchanges regarding the listing of exchange-traded products generally, and the pathway to admission to trading on regulated markets. As a result, the SEC’s approval orders reflect the accumulated compromises and lessons from those precedents. In that respect, I argue the resulting framework might well reveal a superior framework for integrating cryptoasset products into financial regulation. 

Keywords: exchange-traded products, cryptocurrency, cryptoasset, ETP, ETF, exchange-traded fund, self-regulation