Is the SEC Ready to Approve a Bitcoin ETF?
You’ve probably heard of the ongoing debate surrounding the approval of a bitcoin exchange-traded fund (ETF) in the United States. The Securities and Exchange Commission (SEC) is now facing a crucial decision to either give a thumbs up or thumbs down to ARK’s application for a bitcoin ETF by August 13. But is the SEC ready to finally approve a bitcoin ETF, or will they punt the decision yet again?
ARK’s application for a spot bitcoin ETF was published in the Federal Register on May 15. According to the SEC’s filing on June 15, the Commission has set August 13 as the deadline for their decision. However, the SEC has the authority to extend this deadline for up to 240 days. This means that they could potentially delay a final response until January 10, 2024, for ARK’s application, and until March 2024 for the other eight organizations, including BlackRock, Bitwise, VanEck, and WisdomTree, that have filed applications for spot bitcoin ETFs.
A ninth organization, Grayscale, has also filed to convert its Grayscale Bitcoin Trust into a Bitcoin Spot ETF. If the SEC ultimately approves one bitcoin ETF, many argue that all the applications should be approved simultaneously. Grayscale recently wrote a letter to the SEC stating that, “[T]he SEC’s actions related to bitcoin ETFs should be made in a fair and orderly manner,” and that the SEC should not “pick winners and losers” among the applicants.
One of the reasons why the SEC has denied prior spot bitcoin ETF applications is due to concerns of fraud and manipulation in the underlying markets. However, the current crop of applications has introduced a new feature called a “surveillance sharing” agreement with exchanges like Nasdaq and Cboe. This agreement allows for the sharing of crucial information about market trading activity, clearing activity, and customer identification, which aims to reduce the chances of market manipulation and asset diversion.
Although there is no clarity on whether these changes would be sufficient for the SEC to approve a spot bitcoin ETF, the exchanges and applicants have been working diligently to address the SEC’s concerns.
Interestingly, a court case between Grayscale Bitcoin Trust (GBTC) and the SEC seems to be forcing the SEC’s hand. Grayscale has sued the SEC over its refusal to allow the trust to convert to a bitcoin ETF. During the court hearings, judges questioned the SEC’s denial of the application, particularly because the commission had previously approved bitcoin futures agreements that also had surveillance agreements in place. Bitcoin supporters see this legal process as a way to push the SEC to provide specific reasons for their decisions.
Not everyone is optimistic about the SEC’s willingness to approve a bitcoin ETF. Ric Edelman, founder of the Digital Assets Council of Financial Professional (DACFP), believes that we won’t see a spot bitcoin ETF anytime soon. He points out that the SEC has rejected every bitcoin ETF application for the past 10 years. However, others believe the tide is turning, citing the recent approval of a 2x leveraged Bitcoin ETF in June and the influx of applications for an ethereum futures ETF.
Last week, Bloomberg Intelligence’s James Seyffart and Eric Balchunas estimated the odds of a bitcoin ETF approval at 65%, given the SEC’s poor performance in the Grayscale litigation and other factors.
As the August 13 deadline approaches, the crypto community is eagerly awaiting the SEC’s decision. Will the SEC give the green light to a bitcoin ETF, or will they once again postpone the decision? Only time will tell.
