The US Securities and Exchange Commission (SEC) has once again deferred its decision on whether to approve the first US exchange-traded fund (ETF) directly linked to Bitcoin. This move has left cryptocurrency advocates disappointed, coming just days after a significant court ruling that had been seen as a potential breakthrough for the much-anticipated financial product.
The SEC, the primary regulatory body overseeing securities in the United States, responsible for investor protection among other duties, revealed its latest delay in processing Bitcoin ETF filings from several prominent entities, including Bitwise, VanEck, Invesco, Valkyrie, and WisdomTree, according to documents published on its website on Thursday. Additionally, a spokesperson from BlackRock confirmed that the financial giant’s ETF filing had also been deferred. SEC Chair Gary Gensler, who has consistently expressed concerns about the potential risks associated with ETFs linked to cryptocurrencies, argued that such delays are necessary to safeguard investors in a market he believes is fraught with fraudulent activity.
This decision comes on the heels of a significant legal victory for Grayscale Investments. On Tuesday, a federal appeals court ruled in favor of Grayscale, overturning the previous rejection ofSEC of its application to convert its Bitcoin trust into an ETF. The court’s decision criticized the SEC’s rejection as “arbitrary and capricious” due to the regulator’s failure to provide a clear rationale for treating similar products differently. It’s worth noting that ETFs holding Bitcoin futures were granted approval back in 2021.
Following the appeals court’s decision, Bitcoin experienced a rally on Tuesday, but it has since declined by 4.7%, trading at approximately $26,000 as of 5:41 p.m. in New York. Despite an overall increase of more than 50% in value this year, Bitcoin remains below half of its all-time high of nearly $69,000 reached in late 2021.
This latest round of deferrals marks the second time in less than a month that the SEC has postponed making a decision on Bitcoin ETFs. On August 11, the regulatory body deferred its decision on a product proposed by 21Shares and ARK Investment Management.
Cryptocurrency proponents have long argued that a spot fund tied to Bitcoin would offer significant benefits to investors and bridge the gap between the cryptocurrency industry and traditional finance. Advocates contended that such a product would simplify money managers’ access to cryptocurrencies on behalf of their clients and signal the maturation of the relatively young industry, which has faced skepticism and regulatory challenges since its inception.
The enthusiasm surrounding the concept of a spot Bitcoin product cannot be overstated, particularly considering the potential for these funds to amass tens of billions of dollars in assets. This year, filings from prominent Wall Street firms such as BlackRock, Invesco, and Fidelity led some analysts to speculate that the SEC might adopt a more open stance toward Bitcoin ETFs after several years of failed attempts by various issuers. BlackRock, with its impressive track record in launching ETFs, was seen by many as a potential harbinger of an eventual ETF debut.
As the SEC’s deliberations continue, the cryptocurrency community remains on tenterhooks, eagerly awaiting the regulatory green light that could pave the way for widespread investment in Bitcoin through ETFs. For now, the fate of these financial products hangs in the balance, leaving investors and enthusiasts to grapple with uncertainty in this rapidly evolving space.
Source: Bloomberg
