Bitwise Asset Management recently enhanced its application for a Bitcoin Exchange Traded Fund (ETF), in response to the challenges noted by the United States Securities and Exchange Commission (SEC). The company’s amended proposal now includes new evidence aimed at tackling the SEC’s argument against using the CME BTC futures market for surveillance-share purposes.
The SEC put the Bitcoin ETF applications of Bitwise and five other financial firms on hold after pushing back against its deliberation on the matter. This decision was prompted by a court’s nullification of the SEC’s denial of another application from Grayscale Investments, regarding its desire to transform its over-the-counter Grayscale Bitcoin Trust into a listed BTC ETF.
Bitwise CIO Matt Hougan suggested that if the SEC disputes the Grayscale judgement, the rules of the game remain the same. The task at hand then is to establish that the CME bitcoin futures market is a ‘regulated market of significant size’ that can serve as a reference for price discovery, superseding the spot market.
However, it is worth noting that fulfilling this requirement may not be enough. Hougan cautioned that although surveillance-sharing agreements with spot exchanges are beneficial, they might fall short in meeting the detailed regulatory demands.
The amendment outlined by Bitwise dives deep into the ambiguous academic record concerning the relationship between BTC futures and spot markets. After examining scholarly references found in 11 previous SEC disapproval notices for spot BTC exchange-traded items, Bitwise stated that the CME is indeed the leading source for price discovery. Furthermore, the company insists the amended proposal shows every in-depth scientific study backs up the understanding that the CME is ‘significant’, thus overthrowing several justifications made by the SEC in previous disapproval decisions.
Though promising, fulfilling these SEC requirements is vital. The SEC’s directives dictate that a listed exchange must have a surveillance-sharing pact with a regulated market that is of a significant size. This becomes applicable if an exchange cannot prove that other means to inhibit fraudulent and manipulative actions are adequate.
So, while Bitwise’s contention is a step in the right direction, it remains to be seen how the SEC will respond to the application and its new counter-arguments. Whether the SEC’s technical regulatory requirements will be satisfied with this latest filing is still a grey area that time will tell.
Source: Cointelegraph
