The race to list the first spot-traded Bitcoin (BTC) Exchange Traded Fund (ETF) in the United States has seen the entry of major financial institutions such as BlackRock, Fidelity and VanEck.
While the US Securities and Exchange Commission (SEC) first approved a bitcoin-linked futures ETF in October 2021, the current filings relate to spot bitcoin ETFs. Following Grayscale’s recent legal victory over SEC scrutiny of the Spot Bitcoin ETF proposal, many now believe the mutual funds’ approval is more likely.
Interest from BlackRock — the world’s largest wealth manager with over $8 trillion in assets under management — prompted several other institutions to reapply for a spot Bitcoin ETF.
Most of these money managers have either had to withdraw their applications for spot Bitcoin ETFs or face rejection because the SEC had reservations about a spot ETF. Here are the top Bitcoin ETF contenders:
- BlackRock: BlackRock applied for a spot bitcoin ETF on June 15, with Coinbase as crypto custodian and spot market data provider and BNY Mellon as cash custodian. The filing shocked the crypto and traditional finance worlds, and the company’s CEO, Larry Fink, previously called BTC a money laundering index. On July 15, the SEC officially accepted BlackRock’s spot bitcoin ETF filing for consideration.
- wisdom tree: The New York-based money manager first applied for a spot bitcoin ETF in the US on December 8, 2021, which was rejected by the SEC in 2022. The agency claimed the ETF was insufficient in terms of investor protection; However, with BlackRock entering the spot Bitcoin ETF race, WisdomTree filed another filing with the SEC on July 19.
- Valkyrie Investments: Asset management firm Valkyrie filed its first Bitcoin ETF application in January 2021, but like many other asset managers, it was rejected by the SEC. However, due to renewed enthusiasm for a spot Bitcoin ETF, Valkyrie resubmitted its application on June 21. The ETF would reference the Chicago Mercantile Exchange (CME) reference price for Bitcoin and trade on the NYSE Arca, with Xapo as the crypto custodian.
- ARC Invest: ARK filed an application for its ARK 21Shares Bitcoin ETF in June 2021. ARK Invest has partnered with Swiss-based ETF provider 21Shares to offer the fund, and it will be listed on the Chicago Board Options Exchange (Cboe) BZX Exchange under the ticker symbol BZX Exchange ARKB, if approved.
- VanEck: VanEck is one of the earliest Bitcoin ETF applicants, submitting its first application in 2018. The money manager withdrew its filing in September 2019 and made a second attempt with the SEC in December 2020, with the trust’s shares scheduled to trade on the Cboe BZX exchange. The company submitted a new application in July 2023.
- Faithful/wise origin: Fidelity Investments first applied for a spot bitcoin ETF in 2021 and reapplied for its Wise Origin Bitcoin Trust on July 19, 2023. At the Wise Origin Bitcoin Trust, Fidelity Service Company would act as the administrator, while Fidelity Digital Assets would act as the BTC custodian.
- Invesco Galaxy Bitcoin ETF: Invesco first filed an application for its Invesco Galaxy Bitcoin ETF alongside Galaxy Digital on September 22, 2021. The joint venture resubmitted its application in July. The joint Bitcoin ETF would be “physically backed” by Bitcoin, with Invesco Capital Management as sponsor.
- bitwise: Bitwise first applied for a spot bitcoin ETF in October 2021 but was rejected by the SEC. The asset manager resubmitted its application in August 2023.
- GlobalX: Fund manager GlobalX joined several other financial giants in the ETF competition in 2021 when it applied for a spot Bitcoin ETF. The fund manager resubmitted its application in August 2023, becoming the ninth applicant. The company named Coinbase as a partner for sharing surveillance data.
Given Grayscale’s recent legal victory and the spate of renewed filings, ETF analysts at Bloomberg have raised their expected odds of approval for a spot Bitcoin ETF from 65% to 75%.
NEW: @JSeyff and I are increasing our odds on 75% of spot bitcoin ETFs launching this year (95% by the end of 2024). While we factored the Grayscale win into our previous 65% ratings, the unanimity and determination of the decision exceeded all expectations, leaving the SEC “very little leeway” via @NYCStein pic.twitter.com/IyEGmWjuHa
— Eric Balchunas (@EricBalchunas) August 30, 2023
As expected, the SEC delayed its decision on all seven applicants. Analysts had predicted that the SEC might not make a decision on an ETF until early 2024 as final deadlines approached (see below).
Find out about the decision timelines for bitcoin ETFs. Source: Bloomberg/Twitter
John Glover, chief investment officer at crypto lending platform Ledn, told Cointelegraph that the ruling on ARK 21Shares, scheduled for Jan. 10, will be the first real indicator of whether the SEC is ready to start approving these types of applications begin. At this point, the final deadline has passed and a decision must be made one way or another.”
Why has the SEC rejected spot bitcoin ETFs in the past?
In its earlier rejection of VanEck’s spot bitcoin ETF, the SEC claimed that the bitcoin market is not large or mature enough to sustain ETF market demand. The commission also said that price volatility and inadequate trade surveillance could potentially make the market vulnerable to fraud and manipulation.
However, with the entry of BlackRock, market experts began to believe that the odds of a spot Bitcoin ETF being approved were good.
New: AI could revolutionize human resources, but there are risks
One of the main factors preventing a spot ETF from being approved is the type of fund.
A futures ETF is based on futures contracts rather than the digital asset itself, which is an important distinction. The futures markets are already heavily regulated to prevent market manipulation, making it easier for the SEC to approve such ETFs.
At the heart of these spot ETF denials is the issuer’s requirement to enter into a “monitor-sharing agreement” with a sufficiently large and regulated bitcoin-related market. Such arrangements are instrumental in enabling the SEC to conduct comprehensive investigations in the event of market irregularities.
A Bitfinex Alpha analyst told Cointelegraph that one of the key concerns behind the rejection of spot bitcoin ETFs was the regulator’s ability to track and continuously ensure the safety and custody of assets. However, for this to happen, the US needs more regulatory and legal infrastructure before “the SEC or other interested parties could allow an ETF provider to settle.”
“If not, then the entire purpose of an ETF (which is to bypass dealings with digital asset wallets or crypto exchanges) is defeated. Therefore, it would not be fair to say that spot bitcoin ETFs do not raise manipulation concerns in the eyes of the SEC. The 2018 rejection of the ProShares Bitcoin ETF makes this point clear. Another concern regarding the document’s literature was the ability of the bitcoin market to handle the volume that would be brought in by the launch of a spot ETF,” the analyst added.
The SEC is primarily concerned with the robustness of trading venues. The regulator oversees futures exchanges like the CME and the Cboe, and all futures ETFs are only allowed to trade on these regulated venues. While there are no SEC regulated spot exchanges.
However, not everyone agrees with the SEC’s assumptions about the vulnerabilities of the spot crypto ETF market. James Koutoulas, founder of futures-focused hedge fund Typhon, told Cointelegraph:
“I can confirm that crypto futures are vastly inferior to spot futures in terms of tracking error. The notion that a US regulator can provide adequate “supervision” against market manipulation in a global 12-digit market is an illusion. Frankly, then, it’s probably more about passing the buck to the CFTC than about accountability. Given that the SEC has an “investor protection” mandate.”
He added that the SEC continues to spur demand for crypto offshore and unregulated players by continuing to reject the simplest products like a BTC ETF. While a BTC ETF might not be perfect, it is much safer than buying BTC from Gensler’s family friend SBF [Sam Bankman-Fried] to FTX.”
Richard Gardener, CEO of technology infrastructure company Modulus, believes that futures ETFs have long been considered more palatable to regulators and that deciding on a spot ETF is a matter of when, not if.
He told Cointelegraph that a spot BTC ETF is “coming sooner rather than later, and the heavy investments from big players like BlackRock and Fidelity signal that.” As long as the big players are in the hunt, the industry is considered to be good, despite short-term setbacks viable in the long term. If the SEC continues to refuse to act, politicians will be forced to act and develop their own answer to the crypto dilemma.”
Ether futures ETFs have a better chance of being approved
While crypto enthusiasts would prefer to see spot ETFs that would legitimize crypto as an asset class, U.S. regulators seem more supportive of futures ETFs.
Bloomberg analysts have predicted that the chances of approval for an Ether (ETH) futures-based ETF are over 90%, with nearly a dozen institutions lined up for approval.
Magazine: How to Protect Your Crypto in a Volatile Market: Bitcoin OGs and Experts Speak Out
Reports in the financial media suggested there was a high probability that the SEC would approve an ether futures-based ETF as early as October.
This is not surprising to us as we said at the start of the race that they would approve ether futures. Nice to be confirmed. So what does this mean for Spot? Hard to say, beyond that it shows that their views/policies/tolerance can change. https://t.co/JXCxNUpj2U
— Eric Balchunas (@EricBalchunas) August 17, 2023
Ken Timsit, chief executive of blockchain startup accelerator Cronos Labs, told Cointelegraph that “the thesis for futures is that futures would allow investors to send signals about what price developments are expected by the market, which in turn would help predict the The price of Bitcoin and Ethereum is smoothing out the large price swings we’ve seen lately.”
Doug Schwenk, CEO of Digital Asset Research, told Cointelegraph that “the near-term psychological fallout would most likely give crypto markets a boost, which is further evidence that regulators remain open to advancing the publicly traded space and remain focused on the heavy.” tangible spot ETF.” ”
Comments are closed.