SEC Rejects More Spot Bitcoin ETF Applications from NYDIG and Global X

The US Securities and Exchange Commission has rejected the applications of two funds that offer spot Bitcoin exchange-traded funds. The SEC received applications from the New York Digital Investment Group and Global X for spot Bitcoin ETF listings in June and August 2021, respectively, and have since deferred on a decision till lately.

Not Meeting the Cut

The SEC rejected the Cboe BZX Exchange and the New York Stock Exchange proposals based on two different fillings on Thursday. The firms had applied earlier to list and trade shares of their respective Bitcoin exchange-traded funds. According to the SEC, the two had failed to meet the burden imposed by the Exchange Act and the SEC’s Rules of Practice. These guidelines demonstrate that the ETF would be structured to safeguard investors and the public interest by preventing fraudulent and deceptive conduct and practices. Before making a judgment on Thursday, the commission specified lengthier periods to accept or disapprove the proposed rule change, and many opened the applications for public discussion. The rejections mirrored similar verdicts by WisdomTree and VanEck for spot BTC ETF filings.

Bitcoin Futures have had More Success

Although the US has not officially approved a spot Bitcoin ETF, many companies have already filed applications for similar products. In August 2021, SEC chair Gary Gensler said that the agency would allow more firms to offer exchange-traded funds based on Bitcoin futures. Since then, the regulator has authorized ETFs tied to Bitcoin futures from Valkyrie, ProShares, and VanEck. Many firms are still waiting for the approval of their crypto exchange-traded funds. However, one firm, Grayscale, is pushing back against the regulators by launching a campaign asking US investors to submit their thoughts on the matter. The firm is also working on the permission to convert its  Bitcoin Trust to a spot BTC ETF. Meanwhile, the regulator is expected to make this decision by July 6, 2022.

Bitwise Spot ETF is also Waiting for Approval

Bitwise had filed its lawsuit against the SEC in October. The SEC was expected to give its verdict in December, but it pushed by another 45 days to give its verdict in February. The SEC has previously delayed its decision to a similar request from Bitwise for similar reasons. Bitwise was given 21 days to reply to the agency’s concerns on liquidity, transparency, and more color on suitability on Bitcoin as the underlying asset for the fund. Bitwise Investments, a cryptocurrency-focused firm, wants to convert its Bitcoin ETP Trust into a spot-traded exchange-traded fund. It would enable them to maintain their position in the cryptocurrency market while other companies offer similar products. Leaders in digital asset management have long been the only alternatives for investors wanting bitcoin exposure through the stock market. That changed when the SEC approved a bitcoin futures ETF. Moreover, other countries, most notably Canada, have already taken the jump. A year ago, Ottawa approved the first bitcoin spot ETFs. As a result, pioneers in digital asset management in the United States may lose their competitive advantage. The rise in bitcoin prices has piqued the interest of many institutional investors. They subsequently reported to the few digital asset managers, causing a supply-demand mismatch.

‘The SEC Is Going to Say Yes’

The launch of the first Bitcoin futures-backed exchange-traded fund in the US was a major milestone for the Bitcoin industry. However, many investors are still not convinced that a spot-traded fund is enough to track the performance of Bitcoin. Ric Edelman stated that the Securities and Exchange Commission would eventually approve a pure-play Bitcoin ETF during an interview. He noted that the product would most likely be approved in 2022 or 2023 because the SEC is running out of excuses to say no.