The Challenging Position Faced by the SEC in Approving Spot Bitcoin ETFs
The U.S. Securities and Exchange Commission (SEC) is facing challenges when it comes to approving spot bitcoin exchange-traded funds (ETFs). Despite these challenges, a research report by Bernstein suggests that the likelihood of approval for such ETFs is relatively high.
Key Points from Bernstein’s Report:
1. SEC Approval for Futures-Based and Leverage-Based Futures ETFs: The SEC has previously granted approval for futures-based bitcoin ETFs and leverage-based futures ETFs, based on the understanding that regulated exchanges provide pricing for futures.
2. Concerns Regarding Spot Bitcoin ETFs: The SEC has expressed concerns about spot bitcoin ETFs because spot exchanges like Coinbase are not regulated by the SEC. Spot prices are also considered less reliable and more susceptible to manipulation.
3. Recent Filings Spark Discussions: Recent filings by asset managers, including Blackrock, for spot bitcoin ETFs have drawn attention to the ongoing deliberations surrounding the approval of spot bitcoin ETFs.
4. Grayscale’s Attempt to Convert GBTC into an ETF: Grayscale’s attempt to convert its Grayscale Bitcoin Trust (GBTC) into an ETF has sparked skepticism about the differentiation between futures and spot prices. The court’s response suggests a need for further consideration in this area.
5. Surveillance Agreement Proposal: Industry experts have suggested a surveillance agreement between spot exchange operators and regulated exchanges like Nasdaq to address the absence of a spot bitcoin ETF. Currently, over-the-counter products like GBTC are popular but more expensive, illiquid, and inefficient.
In conclusion, the SEC prefers the introduction of a regulated bitcoin ETF led by mainstream Wall Street participants, with surveillance provided by existing regulated exchanges. This approach is seen as more favorable than relying on over-the-counter products like GBTC to meet the growing institutional demand for Bitcoin investments.
Hot Take:
The SEC faces challenges in approving spot bitcoin ETFs due to concerns about regulation and the reliability of spot prices. However, recent filings and proposals for surveillance agreements show that the industry is actively addressing these concerns. The introduction of a regulated bitcoin ETF led by mainstream Wall Street participants seems to be the SEC’s preferred approach. This could provide a more secure and efficient option for institutional investors looking to invest in Bitcoin.
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