SEC Able to Play 240 Day Delay for Bitcoin ETF

The U.S. Securities and Exchange Commission (SEC), the financial watchdog responsible for greenlighting cryptocurrency exchange-traded funds (ETFs), appears to be inching closer to granting its approval, following numerous years of submissions.

This June saw BlackRock, the globe’s premier asset management enterprise, throwing its hat in the ring with its Bitcoin ETF application. This move, which added to the pile the SEC is currently sifting through, stirred renewed enthusiasm from investors within and beyond the crypto realm. The firm subsequently initiated a surveillance-sharing agreement with Coinbase, the prominent cryptocurrency exchange. This comes amid whispers suggesting the SEC might be more receptive to ETF applications when such terms are met.

Notably, BlackRock isn’t alone in its pursuit. ARK Invest, led by CEO Cathie Wood, made a bid to list its ARK 21Shares spot Bitcoin ETF in May 2023. However, on Aug. 11, the SEC extended its decision-making process by another 21 days to allow public feedback.

According to the SEC’s framework, it can stretch the ETF application decision timeline to 240 days, giving room for public discourse. However, it’s worth noting the SEC hasn’t yet given the nod to any spot Bitcoin ETF within U.S. borders. It was only in October 2021 that the SEC began welcoming investment propositions linked to BTC futures.

One stumbling block for the approval of a spot crypto ETF might be its very structure. Unlike Bitcoin futures-related ETFs, which permit investments in crypto assets minus an exchange, a spot Bitcoin ETF might necessitate directly holding Bitcoin within the investment fund.

Gemini’s founding duo, Cameron and Tyler Winklevoss, made history by being the initial applicants for a cryptocurrency exchange-traded product back in July 2013 with their Bitcoin Trust. However, at a time when many regulators were possibly still grappling with digital currency concepts, the SEC declined their bid.

Drawing from his firm’s experience of listing a leveraged Bitcoin futures ETF in June, Volatility Shares’ co-founder and chief investment officer, Stuart Barton, shared that interactions with the SEC involved mutual exchanges. However, he hinted that smaller companies could potentially find more favor with the SEC concerning a spot crypto ETF proposal. He opined, “Established firms have been on a repetitive track for years. Although they introduce new applications and filings, they haven’t essentially progressed the discourse.”

As it stands, top-tier asset managers like BlackRock, ARK Invest, Bitwise Asset Management, VanEck, WisdomTree, Invesco, Galaxy Digital, Fidelity, and Valkyrie all have spot Bitcoin ETF applications pending SEC review. Given the SEC’s 240-day extension limit, ARK’s Bitcoin ETF decision is anticipated by January 2024, whereas determinations for the others might stretch until March 2024.

A potential reason for the SEC’s hesitancy might be the ambiguous nature of the U.S. crypto market. Although regulated, there are growing calls from legislators and industry giants for enhanced clarity and supervision. Currently, the SEC has enforcement actions against major players like Coinbase, Binance, and Ripple, and has imposed financial sanctions on firms, for instance, Bittrex. Barton weighed in, “A compromise is imminent. While the SEC needs a broader perspective, I foresee the crypto industry making bigger adjustments.”