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SEC Postpones Approval for All Spot Bitcoin ETF Submissions

Regulation | Sep 1, 2023

Unsplash Erik Mclean expect delays sign - SEC Postpones Approval for All Spot Bitcoin ETF Submissions

Image: Unsplash/Erik Mclean

The SEC has once again postponed its verdict on a slew of spot bitcoin ETF applications

  • Notable applicants awaiting the commission's decision include industry giants such as BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise, and Valkyrie Digital Assets. These applications, which were initially filed earlier this year, have now been deferred until October.
  • The applicants, which comprise both crypto-centric and traditional finance firms, aim to introduce the first spot bitcoin ETF. Such an ETF would pave the way for increased retail investment in Bitcoin, eliminating the complexities of setting up a digital wallet or purchasing Bitcoin directly. The SEC, however, has chosen to extend the existing comment periods, allowing for enhanced public feedback on these applications.

See: The Race for Ethereum Futures ETF Applications

  • The SEC's procedural approach entails a maximum review period of 240 days from the initiation of the application review. Historically, the commission has utilized the entire review duration, pushing final decisions to the end of this period.
Bitcoin spot ETF approval deadlines - SEC Postpones Approval for All Spot Bitcoin ETF Submissions

Source: James Seyffart @JSeyff, ‘X’ platform

Grayscale's Triumph and Its Implications

  • A pivotal moment in this narrative was the recent legal victory of Grayscale Investments. The D.C. Circuit Court of Appeals ruled in favor of Grayscale, critiquing some of the SEC's reasons for rejecting Bitcoin ETF applications as "arbitrary and capricious." Grayscale's contention was that the SEC lacked a concrete foundation to decline its proposal to transition the Grayscale Bitcoin Trust into an ETF.
  • Judge Neomi Rao, representing the unanimous court, highlighted inconsistencies in the SEC's decision-making. She emphasized the near-perfect correlation between spot and futures market prices of Bitcoin and questioned the SEC's differential treatment of similar products.

The Road Ahead

  • The appeals court has now instructed the SEC to revisit Grayscale's application, setting a precedent for other ETF applications. This development, coupled with Grayscale's persuasive argument that its proposed ETF closely mirrors futures ETFs, has reignited optimism within the crypto community.  It's not a matter of 'if but when' sentiment.

See:  Historic Nod from Regulators. Coinbase Secures Approval for Crypto Futures Trading

  • The SEC's evolving stance on Bitcoin ETFs is emblematic of the broader regulatory challenges and opportunities facing the crypto industry. As the commission navigates this complex terrain, its decisions will undoubtedly shape the future of cryptocurrency investments in the U.S.

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