SEC Initiates Proceedings for Spot Bitcoin ETFs, Seeks Public Input

On September 28, the U.S. Securities and Exchange Commission (SEC) filed a number of documents pertaining to exchange-traded funds (ETFs) that are awaiting spot Bitcoin.

The SEC will use the submissions as orders to start proceedings and decide whether to accept or reject proposed rule modifications. The approval of these regulation modifications may open the door for spot Bitcoin ETFs to start trading on commodity exchanges.

The SEC is now accepting opinions on a number of topics via its filings. The majority of the first section’s questions focus on readers’ opinions about whether or not the suggested spot Bitcoin ETFs can stop fraud and manipulation.

SEC Initiates Bitcoin ETFs
Source: Freepik

The SEC also includes a question for commenters in another section asking if they think that certain characteristics of Bitcoin, like its geographically dispersed trading activity, its relatively slow transactions, and the amount of capital needed to participate significantly on each trading platform, make the market intrinsically resistant to manipulation.

Commenters are also asked by the SEC if they concur that detecting, looking into, and preventing fraud would be made easier with a surveillance-sharing deal with Coinbase. This agreement with Coinbase was introduced by a number of pending ETFs through revisions in mid-July.

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In other places, the SEC queries commenters on whether, in comparison to spot Bitcoin, the Chicago Mercantile Exchange (CME) represents a substantial regulated market.

Subsequently, it requests feedback from commentators about the relationship between the CME Bitcoin futures market and Bitcoin spot markets.Since the SEC has already authorised Bitcoin futures ETFs, any resemblance might possibly affect its judgement about the new category of spot Bitcoin ETFs.

Valkyrie, Blackrock, and other impacted

The SEC concurrently released orders for many different ETFs. Two of the filings are about bids to list on the Nasdaq from Valkyrie and BlackRock (iShares); the other is about a proposal from Invesco Galaxy that seeks to list on the Cboe BZX.

The SEC issued a far more comprehensive order about a spot Bitcoin ETF suggested by Bitwise, which is not modelled after BlackRock’s petition and specifically aspires for a listing through NYSE Arca, even if each order is almost identical. Compared to comparable orders that are only eight pages long, one order has an astounding 88 pages of material. Coincidentally, Bitwise included 40 pages of new information to their submission this week.

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The SEC’s judgement is not always delayed by filings

The orders do not specifically delay the SEC’s judgement on the pertinent applications, unlike what some stories claim. However, given the vast quantity of material the SEC is requesting, the existing orders may have the unintended effect of postponing the proceedings.

The SEC has the option to reject any application, even if it is unable to postpone its judgement any longer. In this situation, candidates have the option to reapply and begin the procedure.

Even though each order’s title implies that the SEC may accept any ETF, several of the present filings have a negative tone. Interestingly, the regulator clarifies that the present procedures do not imply that it has reached a verdict on any concerns, instead stating that it is “providing notice of the grounds for disapproval under consideration”.

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