The US Securities and Exchange Commission (SEC) has postponed its decision on BlackRock, Invesco, Bitwise and Valkyrie’s Bitcoin spot ETF applications.
The United States Securities and Exchange Commission (SEC) has once again deferred its decisions regarding multiple spot Bitcoin exchange-traded fund (ETF) proposals from major financial institutions, including BlackRock. This action by the SEC precedes an imminent government shutdown, which is expected to influence the functioning of the country’s financial regulators and other federal agencies.
Bloomberg ETF analyst James Seyffart has been actively providing updates on the situation via his X (formerly Twitter). account. Among the companies mentioned in Seyffart’s tweets, BlackRock, Bitwise Invest, Invesco and Galaxy Digital have already received delay orders from the SEC. Previously, the SEC had already postponed consideration of documentation for the launch of ARK Invest and 21Shares’ Bitcoin spot ETFs.
Seyffart predicts that the remaining applications from WisdomTree, VanEck, and Fidelity will likely be postponed today as well, especially given the looming possibility of a government shutdown. He said, “It’s okay. Guess the SEC ended for the night. We expect the other 3 Bitcoin ETFs to delay orders tomorrow before the government shuts down.”
While many market participants expected responses from the SEC by mid-October, the advanced delays (two weeks before the second expected deadline) have been attributed to the possible US government “shutdown” that will occur on 1 October. and the Senate has yet to reach consensus on several funding bills, the urgency to avoid a shutdown has intensified.
The SEC’s Official Reasoning for Delaying Bitcoin ETFs
The SEC has raised several concerns and considerations about the proposed Bitcoin spot ETFs. Among them are legal and political issues that the proposal has raised that require further analysis. The SEC also focuses on ensuring that national securities exchange rules are robustly designed to prevent fraudulent and manipulative acts. This is done to ensure investor protection and public interest.
Additionally, the SEC has expressed fears about bitcoin markets’ liquidity, transparency, and susceptibility to manipulation. They are interested in understanding the relationship between the Bitcoin spot market and the CME Bitcoin futures market, exploring how one might influence the other.
An additional factor being considered is the surveillance sharing agreement the Exchange intends to have with Coinbase, Inc. The SEC is questioning the effectiveness of such an agreement in deterring malicious practices.
The regulator also argued that Bitcoin, due to its continuous and geographically diverse trading nature, could be vulnerable to price manipulation. Therefore, the SEC is seeking comments on this particular claim to determine its validity.
Industry Comments
Scott Johnsson, financial attorney at Davis Polk, offered his thoughts on the situation, by stating that “The leeway for the SEC to further deny the BTC Spot ETF is MUCH smaller than I think many believe.”
Johnsson also alluded to the impending government shutdown and its potential impact, noting: “The SEC will have a ‘skeletal staff’ in a shutdown,” and added that “They are clearly trying to get their house in order for an extended break.”
Eric Balchunas, another Bloomberg ETF analyst, previously estimated a 75% chance that a Bitcoin spot ETF will be approved by the end of 2023. However, the probability increases to 95% by the end of 2024. The decisive ruling by the US Court of Appeals in favor of Grayscale against the SEC is a major factor in this optimistic projection.
By Leonardo Pérez
