Bitcoin ETF Hopefuls Face Setback as SEC Postpones Ruling

The journey to integrate Bitcoin into traditional financial systems has hit another snag, as the US Securities and Exchange Commission (SEC) has postponed its judgment on Bitcoin exchange-traded fund (ETF) proposals. This setback, however, may only be a brief respite, as further rulings are expected to be announced in the coming weeks.

Scheduled to reach a decision by September 1st, 2023, the SEC’s verdict on the Bitwise Bitcoin ETP Trust hangs in the balance. Following closely, applications from prominent financial players like BlackRock, VanEck, WisdomTree, and Invesco are due just a day later, with additional contenders following suit.

Market enthusiasts are closely monitoring these dates. And this time, it is with the hope that this round of applications could mark a departure from previous attempts. Also, there’s anticipation that an ETF directly investing in Bitcoin could finally be granted regulatory approval.

Notably, BlackRock’s involvement has attracted much attention. This does not go without saying that the industry giant has an established track record of successfully launching ETFs. However, the journey to potentially establishing a spot fund has neither been straightforward nor swift.

Speaking on the delay, Bloomberg Intelligence analyst James Seyffart said, “We fully expect a delay in those decisions as well.”

In his comment, he emphasized that “the only thing that could possibly change that view is if we get a decision in Grayscale’s lawsuit against the SEC, and even then, it’s likely we’d see a delay by those deadlines as well.”

It is important to note that crypto asset manager Grayscale is currently engaged in legal action against the SEC. Additionally, Grayscale is seeking approval to transform its Bitcoin trust into an ETF.

Regulatory Hurdles and Community Aspirations As SEC Delays Bitcoin ETF Ruling

For years, the crypto community and its supporters have been clamoring for a Bitcoin ETF to provide accessible investment options for individuals. They also claim that the ETF will bridge the gap between digital assets and conventional financial markets.

Regulatory authorities, however, have consistently cited concerns over fraud and manipulation as key reasons to withhold approval for such products.

The road to obtaining an ETF has not been without its challenges. Back in 2013, Gemini, founded by Tyler and Cameron Winklevoss, attempted to introduce the first physically-backed Bitcoin ETF, only to face rejection from the SEC.

The recent surge of Interest has emboldened firms not only to vie for Bitcoin ETFs but also to explore more unconventional vehicles.

Numerous entities have submitted applications for ETFs tied to Ether futures or a combination of Bitcoin and Ether futures. However, the US currently lacks trading options for such ETFs, and prior attempts to launch Ether futures ETFs in 2023 were rejected by the SEC.

As a potential indication of the SEC’s evolving stance towards crypto ETFs, the launch of the Volatility Shares 2x Bitcoin Strategy ETF has captured attention. Since its debut in June, this fund has already amassed over $20 million in assets and is the first of its kind to enter the trading arena.

Furthermore, the SEC has an initial 45-day window to evaluate spot fund applications. This is followed by consecutive 45-, 90-, and 60-day periods, summing up to a total of 240 days. Bloomberg Intelligence’s James Seyffart noted that the SEC must reach a verdict within this 240-day timeline.

Despite the ongoing anticipation, market observers are prepared for the possibility of further delays in September.

“The base case for the ETF application has to be that the administrators will do what they have done for years and use all their powers to delay the decision,” remarked Stephane Ouellette, CEO of FRNT Financial, an institutional platform focusing on digital assets.

He further stated, “Even if these products were ultimately approved, it would be very surprising to see them approved at the first instance they are able to be.”

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