By Anushree Dave
The U.S. Securities and Exchange Commission is unhappy with a wave of applications filed this month for spot bitcoin exchange-traded funds, The Wall Street Journal reported Friday.
Industry insiders see the development as a hurdle rather than a roadblock.
Citing people familiar with the matter, the report said the regulator felt the filings were not sufficiently clear and complete. The regulator reportedly informed Nasdaq and Cboe Global Markets, which filed applications for the world’s largest asset manager BlackRock Inc earlier this month. (BLK), and Fidelity Investments.
The report said exchanges or asset managers could update the applications to address the SEC’s feedback and refile.
Invesco (IVZ), Wisdom Tree, Valkyrie, Cathie Wood’s Ark Investments and Bitwise have also resubmitted or reactivated spot bitcoin ETF applications in recent days, the report said.
The SEC, Nasdaq, BlackRock and Fidelity declined to comment. Invesco, Wisdom Tree, Ark, Valkyrie and Bitwise did not immediately respond to a request for comment.
A Cboe spokeswoman confirmed to MarketWatch that it plans to update and re-archive.
The report said the SEC doesn’t think the applicants have been specific enough about how they will manage a surveillance sharing agreement.
A spot Bitcoin ETF does not yet exist in the US because the SEC has not approved one.
“The SEC’s concerns, particularly the need for a supervisory sharing agreement with spot bitcoin exchanges, highlight the growing importance of regulatory compliance and transparency in the cryptocurrency industry,” said Jeff Mei, COO at BTSE, a cryptocurrency exchange.
“In the short term, the lack of approved ETFs could be seen as a hurdle to public adoption and could have a temporary impact on market sentiment, potentially dampening previous enthusiasm.”
May refers to the recent spike for bitcoin, which occurred after BlackRock filed an application earlier this month.
Mei said BTSE sees these developments as an opportunity for mock ETF sponsors and industry players, including crypto exchanges, to actively address SEC concerns. “Furthermore, this rejection of traditional Bitcoin ETF applications may fuel innovation and the exploration of alternative structures.”
Youwei Yang, chief economist at BTCM, a cryptocurrency mining company, says the delay in the approval process can be attributed to the incidents related to the collapse of crypto exchange FTX and the collapse of cryptocurrency Luna/UST in 2022.
“The prospect of a bitcoin spot ETF and wider institutional adoption has fueled expectations of a bullish market trend in recent years,” said Yang.
“Approval of such ETFs looked promising as of 2021. However, incidents involving Luna/UST and FTX in 2022 caused major SEC concerns, leading to a delay in the approval process,” Yang said. “With BlackRock, Fidelity and other major players pushing for regulatory approval, there is renewed hope. Nevertheless, it seems the SEC is not quite comfortable with granting approval just yet.”
Yang said approval of some US bitcoin spot ETFs “looks more likely than now” within the next 6 to 12 months.
Edward Moya, senior market analyst at OANDA, is also optimistic. “Regulators will need to work with these financial giants, but the optimism remains that we will see a US bitcoin ETF before the end of the year,” said Moya. “I think we’ll get an answer to the Grayscale lawsuit pretty soon, which could pave the way for a bitcoin ETF.”
– Anushree Dave
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