- The U.S. Securities and Exchange Commission (SEC) has deemed the recent applications to launch a spot Bitcoin ETF, by asset managers including BlackRock and Fidelity, as insufficient.
- The news led to an abrupt fall in Bitcoin’s price, highlighting the instability of this market.
The U.S. Securities and Exchange Commission (SEC) declared last Friday that the recent applications to launch a spot Bitcoin ETF are inadequate, according to the Wall Street Journal, citing sources close to the issue. This announcement caused a sharp drop in Bitcoin’s price, by $1,000 or over 3%, within minutes. As of the time of reporting, Bitcoin was trading just above $30,000.
The SEC communicated to Nasdaq and CBOE – the exchanges that lodged the spot ETF paperwork for several asset managers, including BlackRock and Fidelity – that the applications lack clarity and comprehensiveness. The primary issue was that the applications didn’t provide enough details concerning the “surveillance-sharing agreements,” including which spot Bitcoin exchange would be utilized. However, the asset managers have the opportunity to revise their applications and resubmit them, a plan CBOE reportedly intends to follow, as stated to the Wall Street Journal and CoinDesk.
The SEC has previously stated in ETF rejection orders that a Bitcoin trust sponsor would need to enter a surveillance-sharing agreement with a significantly large regulated market. A market of considerable size implies that any individual attempting to manipulate an exchange-traded product’s price would need to trade on the same market as the product. Therefore, this agreement allows both the sponsor and the trading platform to identify potential market manipulators.
Currently, no federal regulator supervises spot Bitcoin markets, a situation the Commodity Futures Trading Commission has been advocating to change for years.
We would decline to comment on the possibility of individual filings,
an SEC spokesperson told Crypto News Flash.
The announcement comes at a time when many investors have been anxiously awaiting a positive verdict on the launch of a spot Bitcoin ETF, especially following a flurry of applications from leading financial institutions like BlackRock, Fidelity, Invesco, WisdomTree, and Valkyrie. The shockwave from the SEC’s response is reflective of the significant impact such an ETF can have on the Bitcoin market.
Moreover, BlackRock and other firms’ applications were notable for their inclusion of a “surveillance-sharing agreement”, a step taken to preempt concerns about potential market manipulation. This agreement entails sharing information about market trading and clearing activities between entities, thereby facilitating more transparency and less susceptibility to market manipulation.
Spot Bitcoin ETFs have faced denial from the SEC since 2017. However, in contrast to the U.S. stance, Canada already has such financial products available with significant funds like Purpose Bitcoin, 3iQ CoinShares, and CI Galaxy Bitcoin, all directly invested in spot Bitcoin.
Why this is Bullish for Bitcoin
The U.S. Securities and Exchange Commission’s (SEC) critique of the inadequacy of spot Bitcoin filings – while on the surface might appear negative – can potentially be seen as bullish for Bitcoin. The key lies in the statement that “Asset managers can update the language and refile.” The SEC says:
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The SEC told the exchanges that it returned the filings because they didn’t name the spot bitcoin exchange with which they are expected to have a “surveillance-sharing agreement” or provide enough information about the details of those surveillance arrangements. Asset managers can update the language and refile.
SEC says spot bitcoin filings are inadequate – WSJ
But BlackRock can still refile for the BTC spot ETF… this news is noise IMO. Buying the dip.
The important wording here:
“The SEC told the exchanges that it returned the filings because they didn’t name the spot bitcoin… pic.twitter.com/eMA5b9yLQq
— tedtalksmacro (@tedtalksmacro) June 30, 2023
This is indicative of the SEC providing guidance rather than a hard rejection, hinting at the possibility of future approval. They are not closing the door on BlackRock but rather, pointing out what is necessary to bring their filing up to standard. This constructive feedback could pave the way for a successful refile and the potential establishment of a spot Bitcoin ETF.
As this transpires, investors capitalizing on the temporary price dip are positioning themselves advantageously for the potential upward trajectory. The possibility of a successful ETF could boost Bitcoin’s legitimacy, leading to increased institutional adoption and subsequent price appreciation.
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