The U.S. Securities and Exchange Commission’s (SEC) perspective on spot bitcoin (BTC) exchange-traded funds (ETFs) is indeed a challenging position. Analysts from the brokerage firm Bernstein postulate that the chances of approval are encouraging, on the heels of SEC’s acceptance of futures-based Bitcoin ETFs and leverage-based futures ETFs. This acceptance is premised on the fact that futures pricing emanates from regulated exchanges such as the CME.
However, the umbrella cast by SEC’s sanction does not include bitcoin spot ETFs. Their rationale for this exclusion centers on the lack of regulatory oversight over spot exchanges, such as Coinbase, which, according to SEC, makes spot prices susceptible to manipulation. Despite multiple applications for a spot Bitcoin ETF popping up from various corners of the financial industry, none has found favor with the regulators yet.
Having said that, the financial ecosystem seems to be teeming with innovative workarounds to these regulatory conundrums. For instance, the industry has recently hinted at a surveillance collaboration between spot exchange operators and regulated exchanges, such as Nasdaq, a move that might hold the potential to soothe the SEC’s apprehensions.
Several financial giants have plunged into the marketplace, betting on the promise of spot Bitcoin ETFs. Units of Blackrock and other asset management behemoths like Invesco and Wisdom Tree have either applied or reapplied for a Bitcoin ETF product. Further stirring up the waters, Grayscale, under the aegis of CoinDesk’s parent company, DCG, aims to convert its GBTC into an ETF, a move that is currently under the scrutiny of an appeals court.
However, the skepticism surrounding the approval of spot Bitcoin ETFs has triggered the growth of over-the-counter products like the Grayscale Bitcoin Trust (GBTC). The costs associated with these products, their illiquidity and inefficiency, present yet another quandary.
In Bernstein’s analysis, the SEC would rather endorse a regulated bitcoin ETF steered by established Wall Street players and supervised by existing regulated exchanges. In their perception, this would be a more effective solution than grappling with a GBTC product trying to fill the institutional void. Yet, the question remains – Is the pill of denying spot ETFs based on the notion that futures pricing is derivative of spot pricing, too difficult for the courts to swallow?
Source: Coindesk
