The U.S. Securities and Exchange Commission isn’t satisfied with a wave of applications filed this month for spot bitcoin
BTCUSD,
exchange-traded funds, The Wall Street Journal reported Friday.
Industry insiders see the development as a hurdle rather than a roadblock.
Citing people familiar with the matter, the report said the regulator found the filings weren’t sufficiently clear and comprehensive. The regulatory agency reportedly informed Nasdaq and Cboe Global Markets, which filed applications for the world’s largest asset manager BlackRock Inc.
BLK,
and Fidelity Investments earlier this month.
The report said exchanges or asset managers can update the applications to address the SEC’s feedback and refile.
Invesco
IVZ,
Wisdom Tree, Valkyrie, Cathie Wood’s Ark Investments, and Bitwise have also refiled or reactivated spot bitcoin ETF applications in recent days, the report said.
The SEC, Nasdaq, BlackRock, and Fidelity declined to comment. Invesco, Wisdom Tree, Ark, Valkyrie and Bitwise didn’t immediately respond to a request for comment.
A Cboe spokeswoman confirmed to MarketWatch that it plans to update and refile.
The report said the SEC doesn’t think the applicants have been specific enough about how they’ll manage a surveillance-sharing agreement.
A spot Bitcoin ETF doesn’t yet exist in the U.S. because the SEC hasn’t approved one.
“The concerns raised by the SEC, particularly the need for a surveillance-sharing agreement with spot bitcoin exchanges, highlight the increasing importance of regulatory compliance and transparency in the cryptocurrency industry,” said Jeff Mei, COO at BTSE, a cryptocurrency exchange.
“In the short term, the lack of approved ETFs may be perceived as a hurdle to mainstream adoption and could have a temporary impact on market sentiment, potentially tempering earlier enthusiasm.”
Mei is referring to the recent spike for bitcoin
BTCUSD,
which occurred after BlackRock filed an application earlier this month.
Mei said that BTSE views these developments as an opportunity for spot ETF sponsors and industry players, including crypto exchanges, to actively address the concerns raised by the SEC. “Plus, this rejection of traditional Bitcoin ETF applications could ignite innovation and the exploration of alternative structures.”
Youwei Yang, chief economist at BTCM, a cryptocurrency mining company, says the slowdown in the approval process could be attributed to the incidents involving the collapse of crypto exchange FTX and the collapse of cryptocurrency Luna/UST in 2022.
“The prospect of a bitcoin spot ETF and broader institutional adoption has fueled expectations of a bullish market trend in recent years,” said Yang.
“The approval of such ETFs appeared promising starting in 2021. However, incidents involving Luna/UST and FTX in 2022 raised significant concerns for the SEC, leading to a slowdown in the approval process,” Yang said. “With the likes of BlackRock, Fidelity, and other major players pushing for regulatory approval, there is renewed hope. Nonetheless, it seems that the SEC is not yet fully comfortable with granting approval.”
Yang said approval of some U.S. bitcoin spot ETFs within the next 6 to 12 months “seems more likely than at present.”
Edward Moya, senior market analyst at OANDA, is also optimistic. “Regulators are going to have to work with these financial giants, but optimism remains that we will see a U.S. bitcoin ETF before the end of the year,” said Moya. “I think we will get an answer on the Grayscale lawsuit fairly soon, which could pave the way for a bitcoin ETF.”
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