The Securities and Exchange Commission has never approved a spot Bitcoin ETF, but that may change in the near future, according to brokerage firm Bernstein.
The firm said in a Monday report that the agency is likely to soon approve a spot Bitcoin ETF, according to CoinDesk. Several other countries, including Brazil, Dubai, and Canada, have already approved similar ETFs.
Last month, a flurry of applications for spot Bitcoin ETFs were filed after BlackRock, the world’s largest asset manager, applied for one on June 15. But the applications, including those from BlackRock and Fidelity, faced a setback last week when the SEC called them inadequate, as the Wall Street Journal reported.
The Journal report claimed that the SEC told Nasdaq and Cboe, which are planning to list several of the proposed spot Bitcoin ETFs, that the applications didn’t sufficiently outline a surveillance-sharing agreement meant to cut down on fraud and manipulation. The applications also did not specify which spot crypto exchange would be used for the ETFs and thus be subject to the surveillance-sharing agreement.
Cboe refiled the applications for Fidelity, WisdomTree, VanEck, Invesco, and ARK Investment Management on Friday, and specified that it would enter surveillance-sharing agreements with Coinbase, according to the Journal.
Last month, the SEC approved the first leveraged Bitcoin futures ETF. The new Volatility Shares 2x Bitcoin Strategy ETF, or BITX, uses debt or derivatives to try to eke out a profit from increases in the price of Bitcoin futures contracts. The SEC has also previously approved Bitcoin futures ETFs from firms such as ProShares and VanEck.
Still, unlike a spot Bitcoin ETF, Bitcoin futures ETFs do not invest directly in Bitcoin, and BITX, the most recently approved example, is not meant for the common investor. According to the SEC filing for BITX, investors could lose their money in a single day, adding that the fund is not meant for, “investors who do not actively monitor and manage their portfolio.”
Meanwhile, Grayscale’s bid to convert its popular Grayscale Bitcoin Trust to an ETF seems to be going well for the firm, with at least one judge reviewing its case casting doubt on the difference in manipulation resistance between futures and spot prices. This could be sign that a spot Bitcoin ETF could be approved soon, according to the report.
“The court did not sound convinced that the futures price is not derived from the spot price, and thus to allow a futures-based ETF and not allow spot sounds like a difficult pill to swallow for the courts,” the report claimed, according to CoinDesk.
