On September 28, the U.S. Securities and Exchange Commission (SEC) filed several documents related to pending spot Bitcoin exchange-traded funds (ETFs).
These filings serve as orders that initiate proceedings through which the SEC will determine whether to approve or reject proposed rule changes. If these rule changes are approved, it could pave the way for spot Bitcoin ETFs to begin trading on commodities exchanges.
What the SEC Is Inquiring About:
Through these documents, the SEC seeks input from the public on various matters. First, they want to know whether the proposed spot Bitcoin ETFs are susceptible to, or capable of mitigating, fraud and manipulation.
Furthermore, the SEC is interested in whether specific aspects of Bitcoin, such as its geographically dispersed trading activity, relatively slow transactions, and the capital required for significant participation on trading platforms, inherently make the market resistant to manipulation.
They also inquire whether a surveillance-sharing agreement with Coinbase would aid in detecting, investigating, and preventing fraud. Several pending ETFs incorporated this agreement with Coinbase through amendments in mid-July.
Additionally, the SEC is seeking opinions on whether the Chicago Mercantile Exchange (CME) represents a regulated market of significant size compared to the spot Bitcoin market. Later, they are soliciting input on the correlation between Bitcoin spot markets and the CME Bitcoin futures market. Since the SEC has previously approved Bitcoin futures ETFs, any resemblance may potentially influence its decision on the new class of spot Bitcoin ETFs.
Affected Parties:
The SEC issued orders for multiple ETFs concurrently. Two filings pertain to proposals from BlackRock (iShares) and Valkyrie, targeting Nasdaq listings, while another relates to an Invesco Galaxy proposal aiming for a Cboe BZX listing.
No Explicit Delay in SEC Decision:
Contrary to other reports, these orders do not explicitly postpone the SEC’s decision on the relevant applications. However, these current orders may have a delaying effect, as the extensive information sought by the SEC could prolong the proceedings.
Even if the SEC cannot further delay its decision, it retains the option to reject each proposal. In such a scenario, applicants may submit new applications and initiate the process anew.
Conclusion:
While the titles of each order suggest that the SEC could approve each ETF, certain sections of the current filings convey a cautious tone. Notably, the regulator states that it is “providing notice of the grounds for disapproval under consideration” and asserts that the ongoing proceedings do not signify a conclusion on any issues.
