SEC Delays Set Deadlines for Bitcoin ETF Approval to Early 2024

SEC Delays Set Deadlines for Bitcoin ETF Approval to Early 2024 – The United States Securities and Exchange Commission (SEC), the governing body overseeing the approval of a cryptocurrency exchange-traded fund (ETF) for spot trading, appears to be edging closer to granting permission after years of applications.

In June, BlackRock, the largest asset management company globally, joined the list of applicants seeking approval for a Bitcoin ETF under SEC scrutiny. This move sparked renewed interest among both cryptocurrency and traditional investors. BlackRock subsequently established a “surveillance-sharing agreement” with Coinbase, a cryptocurrency exchange. 

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This step was taken in response to indications that the SEC might be more inclined to approve an ETF application if certain conditions, like surveillance-sharing, were met. BlackRock is only one of several firms with pending crypto ETF applications awaiting review by the SEC. 

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Another notable example is ARK Invest, led by CEO Cathie Wood, which submitted its application for the ARK 21Shares spot Bitcoin ETF in May 2023. On August 11, the SEC postponed its decision once again, extending the deadline by 21 days. This extension was granted as the regulatory body solicits public input on the proposal.

According to SEC guidelines, the federal regulatory body possesses the capability to postpone ETF applications for a period of up to 240 days. This delay can be enacted through measures such as soliciting public input or other means, starting from the initial submission in the Federal Register. 

However, it’s noteworthy that the SEC has not yet granted approval to any US-based firm’s proposal for a Bitcoin ETF, and it was only in October 2021 that they began accepting investment instruments linked to Bitcoin futures.

A potential hurdle in obtaining SEC approval for a cryptocurrency ETF that directly tracks the spot market could be related to the inherent characteristics of such an investment vehicle. Also, ETFs linked to Bitcoin futures offer a way for both individuals and businesses to invest in the cryptocurrency without requiring involvement from a traditional exchange. 

People Also Read: Former SEC Official Warns ‘Crypto Regulatory Onslaught Will Never End’

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On the other hand, a spot Bitcoin ETF might involve the inclusion of actual Bitcoin holdings within a fund, facilitating a more direct form of investment. In July 2013, Cameron and Tyler Winklevoss, the co-founders of Gemini, took the initiative to submit an application for the listing of a crypto exchange-traded product. 

This application was based on their Bitcoin Trust. At that time, the concept of digital currencies might not have been comprehended by numerous regulatory bodies, and the end result was the rejection of the application by the SEC. 

Stuart Barton, who is the co-founder and chief investment officer of Volatility Shares, the company responsible for introducing a leveraged Bitcoin futures ETF to the market in June, shared with a news outlet that their interaction with the SEC during the application process included iterative discussions. 

While the regulatory body put forth suggestions for modifications in disclosure documents, it exhibited a generally “collaborative” approach. Barton speculated that relatively smaller firms could potentially have an advantage when it comes to engaging with the SEC regarding the introduction of a spot cryptocurrency ETF.

Currently, legislators in the United States are in the process of deliberating on a bill aimed at establishing clearer delineations for the regulatory responsibilities of the SEC and the Commodity Futures Trading Commission (CFTC) in relation to digital assets. 

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Furthermore, until comprehensive regulations are solidified, both the regulatory authority and the industry might need to take into account judicial rulings. This is exemplified by the recent court judgment in the SEC versus Ripple case, where a judge predominantly determined that XRP did not qualify as a security. 

This decision has wide-ranging implications for all entities engaged in cryptocurrency-related activities within the United States. As of August, a number of analysts have put forth the notion that the likelihood of obtaining approval for a spot Bitcoin ETF in the United States stands at approximately 65%. This estimation takes into consideration factors such as BlackRock’s application. 

Both Cathie Wood and Grayscale, the asset management firm currently pursuing legal action against the SEC in connection with their ETF application, have insinuated that the regulatory body might opt to greenlight several applications concurrently. This approach could serve to prevent any single company from gaining an upper hand over its competitors.

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