SEC Punts Spot on Bitcoin Applications
The SEC has delayed spot bitcoin ETF applications from seven firms until mid-October as the agency faces continued pressure to approve a variety of digital asset exchange-traded fund products.
On Aug. 31, the regulator announced it would delay its decision to approve or deny applications from the firms seeking to start spot bitcoin ETFs: WisdomTree Inc., Invesco, Valkyrie Funds, Bitwise Asset Management Inc., Fidelity Investments, VanEck and BlackRock Inc. The SEC’s mid-October timeline to reach a decision could stretch out further.
The regulatory body said it needed more time to “consider the proposed rule change and the issues raised therein.”
The agency’s delays come as the SEC lost a major lawsuit against cryptocurrency investment firm Grayscale Investments on Aug. 29, stemming from its blocking conversion of the Grayscale Bitcoin Trust into an ETF. Judges on the U.S. Court of Appeals D.C. Circuit called the SEC’s decision to stop Grayscale’s trust conversion “arbitrary and capricious” in a watershed win for digital asset ETFs.
The SEC and its chairman, Gary Gensler, have historically rejected ETFs that track physical bitcoin as opposed to bitcoin futures contracts. In fact, the SEC has denied more than 30 proposals since 2021—every single one presented to it. The largest bitcoin futures ETF is the ProShares Bitcoin Strategy ETF (BITO), with assets of $1.1 billion.
Spot Bitcoin Path Unclear
Yet the path forward for a so-called spotcoin remains unclear. While the SEC will have to contend with its loss in court, the agency can punt on any applications down the line. The regulator can also appeal its loss to Grayscale.
The new deadlines for Wisdom Tree’s and Fidelity’s Wise Origin Trust are Oct. 17, while Valkyrie has been pushed to Oct. 19 and Bitwise to Oct. 16. The SEC could push its decision back as far as 240 days.
The price of bitcoin dropped below $26,000 Friday following the news.
While many of those vying for a so-called spotcoin ETF are digital asset investment firms, such as Bitwise and Grayscale, traditional finance firms including BlackRock have significantly transformed the landscape by stepping into the race.