SEC Delays Decisions on Bitcoin ETF Applications

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SEC Delays Spot Bitcoin ETF Applications

The U.S. Securities and Exchange Commission (SEC) has postponed its decision on spot bitcoin ETF applications from seven prominent firms, extending the deadline to mid-October. The firms seeking approval for these exchange-traded funds (ETFs) include WisdomTree Inc., Invesco, Valkyrie Funds, Bitwise Asset Management Inc., Fidelity Investments, VanEck, and BlackRock Inc. This delay raises questions about the SEC’s stance on digital asset ETF products.

Additional Time for Deliberation

The SEC cited the need for more time to “consider the proposed rule change and the issues raised therein.” This decision comes shortly after the SEC suffered a significant legal setback in a case against Grayscale Investments, where judges ruled against the SEC’s blockage of the conversion of the Grayscale Bitcoin Trust into an ETF. This verdict was seen as a landmark moment for the digital asset ETF sector.

Historical Resistance to Physical Bitcoin ETFs

Historically, the SEC, led by Chairman Gary Gensler, has been reluctant to approve ETFs tracking physical bitcoin, favoring bitcoin futures contracts instead. In the past two years, the SEC rejected more than 30 such proposals. Currently, the ProShares Bitcoin Strategy ETF (BITO), which tracks bitcoin futures contracts, is the largest bitcoin futures ETF with assets totaling $1.1 billion.

Uncertain Future for Spot Bitcoin ETFs

The future of spot bitcoin ETFs remains uncertain, with the SEC now facing legal challenges and increasing pressure to reconsider its stance. The regulatory agency can either decide on these applications or opt to delay them further, potentially extending the waiting period by up to 240 days. The news of the SEC’s decision contributed to a drop in bitcoin’s price to below $26,000.

Notably, while many of the firms seeking spot bitcoin ETF approval are digital asset investment companies like Bitwise and Grayscale, traditional financial institutions such as BlackRock have entered the race, reshaping the landscape of this emerging market.

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