Matt Corallo, “a long-time developer of bitcoin”, posted a comment to the United States Securities and Exchange Commission (SEC) regarding a “proposed rule change relating to the listing and trading shares of the Bitcoin Investment Trust [(BIT)] under NYSE Arca Equities Rule 8.201.” In the post, Corallo expresses “grave concerns” pertaining to “the lack of consumer protection” afforded to investors in the event that the bitcoin network is forked. The comment has generated mixed reactions on social media, with some accusing the developer of appealing to the very institutional apparatus that bitcoin originally sought to circumvent and undermine.
Also Read: A Closer Look at the Suspicious Activity Involved With the Bitcoin Gold Fork
A Comment Regarding the BIT Posted by Matt Corallo, a Long-Time Bitcoin Core Developer, Has Garnered Significant Attention
The comment was made regarding proposed rule changes that govern the listing and sharing of BIT shares. It focuses on the potential ramifications of future forks with BIT’s management of its customers’ funds.
Corallo states that he has “grave concerns with the proposed rules for the maintaining of bitcoin deposits and the lack of consumer protection in the event of bitcoin network rules changes in the current filings.” Corallo describes a “permanent fork” as “occur[ing] when one group of users wish to make a change to bitcoin’s consensus rules, while another group does not… This leads to two cryptocurrencies and may lead to significant ambiguity around which should be referred to as ‘bitcoin’”. The post then expresses concerns that under the current legal guidelines, the BIT is able to “select a Bitcoin… in consultation with the Index Provider” in the event of a fork.
Corallo emphasizes that Digital Currency Group (DCG), the sole owner of BIT and an investor in TradeBlock (BIT’s Index Provider), may be able to “shift significant value towards one cryptocurrency over another. As an investor in numerous bitcoin startups, DCG further has a strong incentive to encourage rule changes and adoption of cryptocurrencies that benefit their portfolio companies and their own operation. They may overrule changes that benefit the investors in the proposed [Exchange-Traded Product {ETP)].” The developer also criticizes the fact that “DCG is not explicitly barred from trading on the value of different cryptocurrencies prior to the announcement of BIT’s decision as to which fork will receive the future attention of the proposed bitcoin ETP, and its investors’ capital.”
Many Have Seen the Comment as an Attempt to Undermine the Decentralization of Bitcoin
Lastly, Corallo addresses the example of the “Ethereum/Ethereum Classic fork”, arguing that “DCG invested heavily on one side of the fork, almost entirely at odds with the remainder of the Ethereum userbase, businesses, and exchanges… If DCG had, at that time, owned the Sponsor of an Ethereum ETP under the proposed rules for the BIT ETP, they would be free to, and perfectly justified under the S-1 in, declaring the ETP to hold only Ethereum Classic, potentially to their own gain, and to significant market confusion.” This example is directly associated with the proposed upcoming Segwit2x fork, with Corallo stating that “DCG and some of its portfolio companies have been strongly promoting Segwit2x” – implying that the hypothetical example laid out in the Ethereum/Ethereum Classic example may potentially become a reality in coming months.
The implication that bitcoin’s core developers are appealing to the SEC to mitigate potential market risks associated with a fundamental underpinning to the bitcoin code – the ability to fork the network, has been perceived by many to comprise an attack on the bitcoin community’s ability to exercise autonomy in determining the future direction of the project. One Redditor posting under the pseudonym of ‘cryptokids‘ advances this position, stating that “the ability to fork is in the code…it’s a part of the bitcoin concept. Lack of central control and competition is a defining feature and it purifies the code, keeping everyone honest and forcing the chain to adapt to demand or perish. ‘Protection; from the SEC is protection from innovation and from the demands of the community.”
Just recently, news.Bitcoin.com published an in-depth look at a lesser known upcoming hard fork on the Bitcoin network planned for October 25 called Bitcoin Gold (BTG), concluding that there are a number of significant flaws with the project.
Do you think that the SEC will respond favorably to Corallo’s position regarding the BIT? Share your thoughts in the comments section below!
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