originalDespite BlackRock, Don’t Expect a Flood of Spot-Bitcoin ETFs Soon: Experts》, compiled by Odaily jk.
Will we witness a wave of spot Bitcoin exchange-traded funds (ETFs)? If youve been around the cryptocurrency industry for a while, you know that ETFs have long been seen as key to building broad markets for digital assets. Recently, even a major institution, including BlackRock Inc., submitted a proposal to set up such a vehicle, raising hopes. If a leading institution like BlackRock gets into a Bitcoin ETF, the emergence of the first U.S. cryptocurrency ETF must not be too far away.
However, according to some experts contacted by CoinDesk, we may still have to wait a while.
At the same time as BITX’s approval, a number of institutions filed a series of applications with the SEC for spot Bitcoin ETFs stating that they would enter into a monitoring sharing agreement with Coinbase, including one from BlackRock Group. Bitcoin (BTC) briefly climbed above $31,000 after a surge in ETF applications, only for the entry of BlackRock, the worlds largest asset manager with more than $10 trillion in assets under management, reflecting the market sentiment. How could the SEC reject this financial giant? and Theres no question that BlackRock only filed because they knew it would ultimately be approved.
“When BlackRock comes into the market, you have to ‘listen,’” Matt Hougan, chief investment officer at Bitwise Asset Management, told CoinDesk TV. Like BlackRock, Bitwise also resubmitted its application for a Bitcoin spot ETF. Brokerage firm Bernstein also mentioned that the SEC’s stance on spot Bitcoin (BTC) ETFs is difficult to adhere to, and the probability of approval is quite high.
However, Opimas LLC CEO and founder Octavio Marenzi and others said the application was not destined to be approved.Theyve identified a custodian that the SEC itself has determined was operating illegally...I dont quite understand how BlackRock made this happen.Marenzi said.
It’s been a decade since the cryptocurrency industry first sought to launch a spot Bitcoin ETF, and one person familiar with the process believes thatThere wont be any approvals anytime soon。
Volatility Shares’ 2x Bitcoin Strategy ETF (BITX) became the first leveraged cryptocurrency ETF available in the U.S. on June 27, and the SEC’s chief investment officer Stuart Barton was at the helm of its carefully filed application.
Barton said: “The delay is because of the unregulated nature of cryptocurrency exchanges. It takes a long time for an exchange to become a regulated exchange. It is a multi-year process. This is a step before the ETF is approved. Currently , no exchange that trades Bitcoin is regulated.”
CoinDesk also spoke with two other industry experts – traditional hedge fund manager James Koutoulas, who is currently fighting an SEC subpoena involving a political memecoin targeting Joe Biden and Jai Waterman; and Jai Waterman, CEO of crypto asset trading platform Blockstation.
Both expressed doubts about the idea of immediate U.S. approval of a spot Bitcoin ETF. Drawing on Koutoulas experience with ongoing legal battles with the SEC, he said that while the crypto communitys optimism is reasonable, hes not sure 100 percent of final approval will be forthcoming.
“It’s not a sure thing that the ETF will be approved,” Koutoulas said. “You just have to look at the conflicts (such as the lawsuit against Coinbase).” Waterman said the SEC is in a difficult position and faces political pressure, but it will “ It takes a long time.”
“The ETF will not be approved until Coinbase’s lawsuit is resolved or thrown out,” Waterman said. “They may switch to another institution instead of Coinbase, but that would also be difficult because regulators want to find an institution that is reputable and doesn’t have ongoing litigation.”
However, BlackRock CEO Larry Fink seems convinced. Not only has he said that the asset class’s fervent believers rely heavily on it for “illegal activities,” he also said that Bitcoin could “change the financial system.” But one of his recent comments suggests that even he thinks ETF approval will take time.
We hope, as we have in the past, that we can work with regulators and get approval one day, I dont know when that day will be, but we will see how everything develops, Fink said earlier this month.
According to experts, in addition to the approval of leveraged products, BlackRock’s filing and subsequent market optimism, the XRP verdict has also put collective pressure on the SEC. Last week, a U.S. court partially ruled in favor of Ripple, holding that the sale of Ripple’s XRP tokens on exchanges and algorithms did not constitute an investment contract. “The XRP verdict may support Coinbase’s case,” Waterman said. This may be another pressure point in addition to these ETF filings. However, I think the SEC will appeal the Ripple decision.
Koutoulas said the XRP ruling is a very serious blow to the SEC because it confirms everything the crypto legal community has been arguing about SEC overreach. “Within hours of their significant losses on XRP, the SEC rushed to harass me with a subpoena, admitting that ‘the question of whether our Meme coins are securities is left to be decided at another time.’” Koutoulas cited the SEC’s subpoena .
It is clear that this subpoena does not involve a legitimate investigation but rather weaponizes the federal government and uses it against cryptocurrency and political opponents.
Lawyers for crypto asset manager Grayscale criticized the regulator for adding more pressure to the SEC by approving Barton’s leveraged Bitcoin ETF after rejecting its application for a spot Bitcoin ETF. They wrote to the District of Columbia Circuit Court of Appeals alleging that the SEC-approved leveraged ETF is “even more dangerous than Grayscale’s own spot Bitcoin ETF.” Grayscale is in litigation with the SEC over the rejection of its own spot Bitcoin ETF application.(Note: Grayscale is a subsidiary of DCG and the parent company of CoinDesk.)
Barton said the process for approving a leveraged ETF and a spot Bitcoin ETF are different. “The difference between our leveraged ETF and the spot Bitcoin ETF is that our ETF tracks Bitcoin futures traded on the regulated exchange Chicago Mercantile Exchange (CME), whereas the proposed Bitcoin spot ETF plans to refer to any Bitcoin Cash is not traded on any regulated exchanges,” Barton explained.
Barton said the methodology for getting a spot Bitcoin ETF approved is very difficult because there is a listing rule - 19 b-4. The rule requires self-regulatory entities to seek SEC approval before making any trading rule changes. In this case, Nasdaq and CBOE’s BZX exchange are looking to take over compliance responsibilities because the chosen monitoring partner, Coinbase, is an unregulated exchange and does not comply with SEC requirements. As part of this rule change, Nasdaq and Cboe BZX plan to meet some of Coinbase’s compliance obligations by monitoring the sharing agreement. Coinbase is currently an unregulated exchange and therefore does not meet SEC requirements.
“The challenge with an ETF filing that requires a 19 b-4 is that the exchange needs a specific approval decision from the SEC to proceed with the listing, which puts the SEC in a very powerful position,” Barton said.
“Exchanges not only need to prove that the ETF complies with a certain set of ETF rules, but they also need to answer a broader set of questions from the SEC because they are essentially asking them, ‘Please allow us to change the exchange rules in order to include this new product as a new product. of ETFs, and very few 19 b-4s are filed, and its a very lengthy process.
Five of Cboe’s ETF applications — Wise Origin, WisdomTree, VanEck, Invesco Galaxy and ARK 21 Shares — as well as BlackRock’s iShares Bitcoin Trust have all filed 19 b-4 filings. “The weakness of a filing that requires a 19 b-4 filing is that you need specific approval from the SEC to go public, which puts the SEC in a very strong position,” Barton said. They dont have to argue with you whether this is a good investment. They can dig deeper because youre essentially asking them please allow us to change the exchange rules to list this new underlying product as a new ETF, And very few 19 b-4s are filed, it’s a very long process.”
Normally when youre going up against regulators you try to take the easiest path, and thats a very difficult path to market. Asked why BlackRock would apply, despite the difficulties, Barton said BlackRock wanted to be first in case the pressure got through to the SEC.
“If anyone can get the green light, its BlackRock.Thats because BlackRock has had about 500 ETF applications approved, only one has been permanently rejected, and the U.S. government does a lot of business with BlackRock, Koutoulas said.
