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(Kitco News) – The Securities and Exchange Commission is looking to get out ahead of the recent hype surrounding the possibility of a spot Bitcoin (BTC) exchange-traded fund receiving approval anytime soon as the regulator has said that the recent filings are inadequate, according to people familiar with the matter.
The Wall Street Journal reported that the agency has informed Nasdaq and Cboe Global Markets, the exchanges that filed applications on behalf of BlackRock and Fidelity, that the filings aren’t sufficiently clear and comprehensive, sources said.
The price of Bitcoin has risen 26.75% since the BlackRock filing was announced on June 15, hitting a high of $31,475 on Friday, June 23, before pulling back to support at $30,000. Fidelity refiled their application on Thursday, which brought fresh momentum to the crypto market, but that has since reversed after the comments from the SEC were reported.
BTC/USD Chart by TradingView
Based on the comments, the passage of any of the recent spot Bitcoin ETF filings from BlackRock, Fidelity, ARK Investment Management, Invesco, WisdomTree, Bitwise Asset Management and Valkyrie is in doubt, which has led to a market-wide pullback.
For seasoned crypto investors, this development is nothing new, as the SEC has a long history of rejecting spot BTC ETFs going all the way back to 2017. The regulator has repeatedly said that these products were vulnerable to fraud and market manipulation and, therefore, would not grant them approval.
While the SEC is clearly against a spot ETF, it has been more open to Bitcoin futures ETFs, granting approval to at least a half dozen such investment products. Last Friday, the regulator approved the Volatility Shares 2x Bitcoin Strategy ETF (BITX), the first leveraged Bitcoin futures ETF to launch in the U.S. market.
The approval for futures ETFs has led to pushback from the crypto community and companies like Grayscale, which argue that the mechanisms for price discovery for futures and spot ETFs are nearly identical, so there is no reason why futures ETFs should be approved while spot ETFs are rejected.
Grayscale took its objections to the next level by filing a lawsuit against the SEC in March. “If regulators are comfortable with ETFs that hold derivatives of a given asset, they should logically be comfortable with ETFs that hold that same asset,” Grayscale said, referring to the SEC’s approval of ETFs based on bitcoin futures.
Many see the passage of a spot Bitcoin ETF as a watershed moment for the crypto industry. It would give institutional investors and retirement accounts wider access to the top crypto since it could be purchased through brokerage accounts as easily as shares of stock.
Crypto proponents had hoped that the inclusion of a surveillance sharing agreement (SSA) in BlackRock’s application would be the key to approval, but 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 an SSA or provide enough information about the details of those arrangements.
A spokesperson from the Cboe told the WSJ that the company plans to update its application and refile. Nasdaq and the SEC declined to comment.
For now, it looks as though the ARK 21Shares Bitcoin ETF from ARK Investments, which is scheduled to have its application reviewed on August 13, is destined for the same fate as the previous spot BTC ETF filings – rejection – unless the SEC changes its position between now and then or the application is amended to clarify the information the regulator is seeking.
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