By
Bhushan Akolkar
May 10th, 2024
The SEC announced a delay in deciding on the Bitcoin and Ether ETFs from Hashdex and Grayscale, stating that it needs more time.
The United States Securities and Exchange Commission (SEC) has officially delayed making a decision on the spot Bitcoin exchange-traded fund (ETF) application submitted by crypto asset management firm Hashdex. The company had submitted an application to the SEC to convert its Bitcoin futures ETF into a spot offering.
SEC Delays Hashdex and Grayscale
The SEC also delayed an application submitted by Grayscale Investments for an Ether futures ETF in September, the same month Hashdex filed for a spot Bitcoin ETF. Although both applications had a deadline of November 17, the SEC has published a notice to extend the deadline and has announced a new date next year. The publication revealed:
“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein. Accordingly, the Commission…designates January 1, 2024, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”
The SEC recently held extensive discussions with Hashdex about its proposal involving physical Bitcoin ETFs. In a recent memorandum, Hashdex argues that the crypto market is mature and that the Chicago Mercantile Exchange (CME) is developed enough to handle physical Bitcoin ETF. According to Hashdex, the market is less prone to market price manipulation because the CME Bitcoin futures market has climbed about 50% since 2022. Hashdex believes that the rising open interest suggests high retail and institutional interest in Bitcoin, making the market less susceptible to manipulation.
Anticipation for Spot Bitcoin ETF Approval
So far, the Commission has yet to approve any proposal for a spot Bitcoin ETF since the Winklevoss Brothers’ Gemini exchange submitted the first application in 2013. The SEC has repeatedly rejected all proposals, citing problems with fraud and market manipulation. Essentially, the Commission believes that no proposal adequately addresses the risk of price manipulation.
The SEC’s recent delays come as the market anticipates an approval sometime soon. The Commission has so far received at least 12 applications this year for spot Bitcoin ETFs.
Recent proposals have tried to address the SEC’s fears about market manipulation. In June, the Cboe BZX Exchange updated its proposal for the ARK 21Shares ETF to include a surveillance sharing agreement (SSA). The Cboe’s amendment followed a similar one from giant asset manager BlackRock Inc (NYSE: BLK), also adding details of an SSA.
The market is currently highly optimistic that the SEC will soon approve one of the proposals it is reviewing. A bullish prediction recently came from Bloomberg ETF analysts Eric Balchunas and James Seyffart, who believe that the Commission will approve more than a few proposals by November 17. Unfortunately, this forecast may have been a little too optimistic.
A crypto ETF expert Stuart Barton believes that the SEC will approve all spot BTC ETF applications simultaneously. According to Barton, the SEC set this precedence before, when it approved all ETH futures-based ETF it was reviewing, including one from Barton’s company Volatility Shares.