A prominent developer of Bitcoin recently expressed concern regarding the SEC’s new proposed rule changes in the Bitcoin Investment Trust.
A long-time developer of Bitcoin, Matt Corallo, recently questioned the United States Securities and Exchange Commission’s (SEC) proposed new changes to the Bitcoin Investment Trust (BIT). The proposed changes in policies relate to the listing and trading shares of the BIT under NYSE Arca Equities Rule 8.201.
Corallo specifically focused on the new changes' lack of customer protection in the event of a fork in the Bitcoin network. Corallo defines a "permanent fork" as when a group of users wants to make a change to Bitcoin's consensus, while another group might refuse to do so.So far, his comments have unleashed mixed reactions across several social media platforms. Some critics have denounced Corallo, saying that he is appealing to the institutional apparatus that Bitcoin wanted to bypass and undermine in the first place.
The proposed rule changes will affect policies that govern the listing and sharing of BIT shares. Its focus seems to be the potential impact of future forks with BIT’s management of its investors’ capital. According to Corallo, the proposed rules for maintaining Bitcoin deposits will fail to protect its users if the bitcoin network's rules change under the current filings. To illustrate this, Corallo used the example of the Ethereum-Ethereum Classic fork.
Such a fork could lead to two different cryptocurrencies, which would leave great ambiguity as to what a Bitcoin is. Corallo pointed out that in such an event, the current legal guidelines state that the BIT will be allowed to select the Bitcoin after consulting with the Index Provider.
Currently, the Digital Currency Group (DCG) is the sole owner of BIT as well as an investor in TradeBlock (the Index Provider for BIT). Considering this, Corallo concluded that the group has the power to shift value significantly in the cryptocurrency market.
In addition, DCG has invested in several cryptocurrency startups. This means that the DCG has a strong incentive to bring about policy changes in cryptocurrencies when it might benefit their portfolio. Corallo stated that the DCG has the power to overrule certain rule changes that benefit their investors in the proposed Exchange Traded Product (ETP). Corallo was also skeptical of the fact the DCG is not yet specifically barred from trading on the value of different digital currencies either before or after the latest announcement from the SEC.
Since Bitcoin’s core developers have started appealing to the SEC to minimize the potential market risks that come with the territory of being able to fork a bitcoin network, many traders and users have taken this as an attack on the Bitcoin community’s autonomy. In addition, several users have started to doubt the Bitcoin developer community's ability to further Bitcoin's advancement in the future.
A Reddit user, using the pseudonym of “cryptokids”, stated in a Reddit thread that being able to fork the network is part of the Bitcoin concept. The lack of centralized control and competition in the market is one of the most defining features of the code. According to the user, it keeps Bitcoin developers honest while simultaneously forcing the chain to evolve or die. It is therefore believed that once the Bitcoin community demands protection from the SEC, innovation in the field will come to a standstill.