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Spot Bitcoin ETF applications published in Federal Register, SEC review begins

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(Kitco News) - The spot Bitcoin (BTC) exchange-traded fund (ETF) applications recently filed by some of the world’s largest asset managers have been published in the Federal Register, moving them one step closer to possible approval in the Securities and Exchange Commission’s (SEC) review process.

Updated data from the Federal Register shows that the U.S. Government’s official journal has received notices of proposed rule changes for the Bitcoin ETF applications from BlackRock, Fidelity, WisdomTree, ARK 21 Shares, VanEck, Bitwise and Invesco Galaxy.

James Seyffart, an ETF analyst with Bloomberg Intelligence, noted that this development was “expected,” and said he anticipates the ETF application from Valkyrie to be added to the Federal Registry on Friday.

The major change that was added to the re-filed applications was the naming of Coinbase as the exchange partner for surveillance-sharing agreements (SSA), which many believe was the critical piece missing from spot BTC ETF applications that had been rejected previously.

Partnering on an SSA means the firm hosting a Bitcoin-related market must share information about market trading activity, clearing activity, and customer identity.

Coinbase, the top cryptocurrency exchange by volume in the U.S., is consistently responsible for more than 50% of the market share of BTC/USD spot trading volume, which is the reason it was selected as the SSA partner for the various ETF filings.

With the applications now published in the Federal Register, the SEC has a window of time to accept or reject the request, extend the time allowed, or open the application for public comment.

After formally accepting the applications on Monday, the regulator opened the public comment period on the proposed rule changes to get feedback before conducting their official review.

While publication in the Federal Register gives the SEC an initial window of 45 days to issue a ruling, the commission can extend that period, and ultimately has up to 240 days to issue a final approval or denial.

Grayscale forms new trust to pursue spot Bitcoin ETF in the U.S.

This means it's possible there could be a ruling in early August, but there is also the potential that the SEC could extend the review process until March 2024.

The approval of a spot BTC ETF has long been a goal of some of the crypto industry’s most ardent proponents, as they feel it will bring increased legitimacy to the asset class and provide a simple, legal way for institutional investors and retirement funds to invest directly in Bitcoin.

This task has proven to be a difficult one, however, as the SEC has rejected dozens of applications to date, citing risks related to fraud and money laundering. The regulator has approved several Bitcoin futures ETFs, including a 2x leveraged Bitcoin ETF, which has drawn scorn from spot BTC ETF proponents who say the risks associated with some of the approved products could be even greater.

The ball is now in the SEC’s court, and the cryptocurrency ecosystem eagerly awaits the decision on the new ETF applications. Many are cautiously optimistic that approval will finally be granted, with that optimism largely centered around the fact that BlackRock is among the filers, and the firm has a track record of 550 ETF application approvals versus only one rejection.

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