The Lack of a Bitcoin Spot ETF and the Rise of Over-the-Counter Products
The U.S. Securities and Exchange Commission (SEC) has been hesitant to approve a spot bitcoin exchange-traded fund (ETF), leading to the growth of over-the-counter products like the Grayscale Bitcoin Trust (GBTC), according to a research report by brokerage firm Bernstein.
Key Points:
- The SEC has approved futures-based bitcoin ETFs and leverage-based futures ETFs, but remains skeptical about spot bitcoin ETFs.
- The regulator believes that spot exchanges, such as Coinbase, are not under its regulation, making spot prices unreliable and prone to manipulation.
- Despite receiving multiple applications, the SEC has yet to approve a spot bitcoin ETF.
- Grayscale has filed for the conversion of its GBTC into an ETF, which is currently before an appeals court.
- The industry has suggested a surveillance agreement between spot exchanges and regulated exchanges like Nasdaq.
The lack of a spot bitcoin ETF has led to the rise of over-the-counter products like GBTC, which are more expensive, illiquid, and inefficient. The SEC prefers a regulated bitcoin ETF with surveillance from mainstream Wall Street participants and existing regulated exchanges, rather than dealing with an OTC product like GBTC, the report stated.
Hot Take:
The SEC’s hesitation on approving a spot bitcoin ETF highlights the challenges surrounding regulation and the need for reliable market pricing. While over-the-counter products like GBTC have filled the institutional gap, the industry is pushing for a regulated bitcoin ETF that can provide more efficient and accessible exposure to bitcoin for mainstream investors.
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