In a recent development with the U.S. Securities and Exchange Commission (SEC), an eagerly awaited resolution on two spot bitcoin exchange-traded fund (ETF) submissions from WisdomTree and Invesco Galaxy has been postponed. The news sent Bitcoin’s (BTC) value spiralling further, registering a 4.1% dip to $26,100 within the last 24 hours, thus raising genuine concerns regarding the highly volatile nature of cryptocurrencies.
Last month, SEC initiated a review into applications from crypto-heavy and conventional finance firms which include established corporations like BlackRock , Wise Origin (Fidelity), and Invesco Galaxy. These pioneers are vying for the unprecedented privilege to introduce the first spot bitcoin ETF, a development for which supporters contend would lead to better retail investment opportunities within the bitcoin domain while conveniently exempting investors from the hassles of creating a digital wallet or having to directly purchase bitcoin.
With today’s delay orders, the SEC is shying away from a concrete verdict, instead choosing to extend existing comment periods, thereby permitting increased public input on the applications.
Furthermore, an illuminating moment of this ongoing saga was when, this week, the D.C. Circuit Court of Appeals criticised the SEC’s rejection of ETF applications, suggesting its reasoning to be “arbitrary and capricious”. This raised eyebrows following a protest by Grayscale that the SEC lacked sufficient grounding to decline its proposal for converting the Grayscale Bitcoin Trust into an ETF. It’s worth noting that Grayscale and CoinDesk are divisions of the parent company Digital Currency Group.
Judge Neomi Rao issued an opinion stating the SEC’s rejection seemed inconsistent, given its prior approval of a pair of bitcoin futures ETFs. She stated that the SEC failed to clarify the differentiation between the two types of products, highlighting a firm “99.9% correlation” between spot and futures market pricing. Moreover, the court sided with Grayscale’s assertion that its proposed ETF was inherently similar to the futures ETFs.
There is an evident ambiguity in the SEC’s stance as the regulator used parallel reasoning to dismiss both Grayscale’s proposal and previous ETF applications. The appeals court has mandated the regulator to revisit the application.
This episode leaves us with a plethora of questions regarding the role and capacity of the regulatory authority in the fast-evolving landscape of cryptocurrency. Whether the SEC will step up and maintain its grasp over this domain, or whether it will allow room for this revolutionary wave to take its natural course is something that remains to be seen.
Source: Coindesk
