BlackRock Inc., Ark and several other prospective issuers of exchange-traded funds investing directly in bitcoin in the U.S. filed amended forms for their applications on Monday with the Securities and Exchange Commission.
Fidelity, Invesco and Galaxy Digital and WisdomTree were among other firms that filed amended S-1 applications with the SEC. The regulator has until Jan. 10 to take action on at least one of their applications, and crypto insiders have speculated the regulator will use that date to announce a slew of decisions at once.
Bitcoin surged to above $47,000 for the first time since April 2022, jumping around 6.5% in the biggest one-day increase since October.
There are two technical requirements that must be fulfilled before a spot-backed bitcoin ETF can start trading. First, the SEC must sign off on so-called 19b-4 filings by the exchanges that would list the ETFs. Second, the regulator must approve the relevant S-1 forms, which are the registration applications from the would-be issuers.
The SEC is planning to vote on the exchanges’ filings, the 19b-4s, in the coming days, Bloomberg News has reported. The regulator may or may not then take action on the issuers’ applications, the S-1s, around the same time. If the SEC grants both sets of required approvals, the ETFs could start trading as soon as the next business day.
An SEC representative earlier declined to comment on the status of the applications.
ETF Impact
Bitcoin’s boosters say ETFs backed by the largest crypto token would represent a watershed moment for digital assets. Billions of dollars are at stake, representing potential inflows from retail and institutional investors alike.
“The market is still seriously underestimating the potential impact of a Bitcoin ETF approval,” said Michael Anderson, co-founder of crypto venture firm Framework Ventures.
But the SEC under the Democrat Gary Gensler and his Trump-era predecessor Jay Clayton has previously refused to allow such a product to launch, citing concerns about investor protection and the potential for market manipulation.
“Past rejection orders indicated the SEC had concerns about fraud and wash trading in the underlying bitcoin markets and that surveillance of a market of significant size was needed to address this concern,” said Richard Levin, chair of the fintech and regulation practice at Nelson Mullins Riley & Scarborough LLP. “The rejection orders did not define what constitutes a market of significant size.”
While the newest proposals include surveillance agreements between the exchanges hosting the ETFs and crypto markets or bitcoin futures markets, Levin said that may not be enough.
“Chairman Gensler and the other two Democrat SEC Commissioners could reject the proposed ETFs because the surveillance agreements do not result in surveillance of a market of significant size,” Levin said. “The coverage of the proposed ETFs also fails to recognize Chairman Gensler and two other Commissioners could embrace the comments of critics of the proposed ETFs, notably Better Markets, which raised this issue in their comment letters on the proposed ETFs.”
Better Markets, in a Jan. 5 letter to the SEC, said approving spot bitcoin ETFs would be a “grave if not historic mistake” that would harm investors.
However, speculation has been mounting since August, when the SEC lost a key legal fight against crypto asset manager Grayscale Investments, that the regulator will have to acquiesce to the growing clamor for the product.
Market wagers that regulatory approval is on the horizon fueled a jump of approximately 160% in bitcoin last year. That still wasn’t enough to re-attain the record highs set in November 2021, when bitcoin hit almost $69,000.
This article was provided by Bloomberg News.