SEC Delays Decisions on Bitcoin ETF Proposals
The United States Securities and Exchange Commission (SEC) has once again postponed its decisions on several proposals for spot Bitcoin exchange-traded funds (ETFs) from major financial institutions, including BlackRock. This delay comes ahead of an expected government shutdown that may impact the functioning of the country’s financial regulators and other federal agencies.
Bloomberg ETF analyst James Seyffart has been providing updates on the situation through his X account. According to Seyffart, BlackRock, Bitwise Invest, Invesco, and Galaxy Digital have already received delay orders from the SEC. Seyffart predicts that the remaining applications from WisdomTree, VanEck, and Fidelity will also be postponed due to the possibility of a government shutdown.
Reasons Behind the Delay
The SEC has raised concerns about legal and policy issues related to the proposed spot Bitcoin ETFs. They want to ensure robust rules in national securities exchanges to prevent fraud and manipulation, protecting investors and public interest. The SEC is also examining the liquidity, transparency, and susceptibility to manipulation in bitcoin markets. They are interested in understanding the relationship between the Bitcoin spot market and CME Bitcoin futures market.
The effectiveness of a surveillance-sharing agreement with Coinbase, Inc. is also under scrutiny by the SEC. They are questioning whether such an agreement can deter malicious practices. The regulator is also seeking feedback on claims of price manipulation vulnerability in geographically diverse and continuous trading nature of Bitcoin.
Industry Insights
Finance lawyer Scott Johnsson commented on the situation, noting that there is limited room for the SEC to deny spot BTC ETFs further based on precedents. He also mentioned that the looming government shutdown may impact the SEC’s decision-making process.
The next set of deadlines for these applications is in mid-January, and further delays are possible. However, the SEC must finalize its decision by mid-March. ETF analyst Eric Balchunas previously estimated a 75% chance of a Bitcoin spot ETF approval by the end of 2023, but this prediction may not come true if the remaining delays occur today. Nonetheless, he believes the probability increases to 95% by the end of 2024 due to a favorable court ruling in favor of Grayscale against the SEC.
Hot Take: SEC Delays Bitcoin ETF Decisions Amidst Impending Government Shutdown
The SEC’s decision to delay its rulings on spot Bitcoin ETF proposals from various financial institutions has created uncertainty in the market. With a potential government shutdown looming, the SEC is taking extra precautions and raising concerns about legal and policy issues, market manipulation, and surveillance-sharing agreements. While this may be disappointing for those hoping for quick approval, it is essential for regulators to ensure investor protection and market integrity. The industry will have to wait until mid-January for further updates on these applications, with a final decision expected by mid-March. In the meantime, analysts remain optimistic about the eventual approval of Bitcoin ETFs as court rulings and market developments shape the regulatory landscape.
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