SEC delays all BTC ETF decisions, an overview of the current status of BTC ETF applications and predictions for approval time.
SEC delays BTC ETF decisions, current status and approval time predictions for BTC ETF applications.
In June 2023, a new round of Bitcoin spot ETF applications led by BlackRock caused the price of Bitcoin to rise by 20% within a week, soaring from $25,000 to $30,000. The news of Grayscale’s victory in court yesterday caused the recent sluggish Bitcoin price to rebound by 5% within 24 hours, rising from $26,000 back to a high of $28,000. The market’s confidence in the successful approval of Bitcoin spot ETFs has once again been ignited.
Now, let’s take a deeper look at the current status of this round of Bitcoin spot ETF applications and the important time points at which they may be approved.
1. Current Status of Bitcoin Spot ETF Applications in 2023
In June 2023, asset management giant BlackRock submitted an application for iShares Bitcoin Trust, starting a new round of competition for Bitcoin spot ETF applications. Following BlackRock’s lead, several investment/asset management institutions have joined this competition. As of August 2023, including BlackRock, 8 institutions have applied for Bitcoin spot ETFs with the SEC.
Summary of Bitcoin Spot ETFs in 2023
According to the application process for Bitcoin spot ETFs disclosed by the SEC, after the SEC publishes 19b-4 in the Federal Register, the resolution time for the ETF will begin to be calculated.
- Bear market increases 200 times, where does Rollbit, the leading pl...
- Social Media Sentiment Analysis How do different countries differ i...
- US Presidential Candidate Grayscale’s Victory Clears the Way ...
The resolution time for Bitcoin spot ETF applications by the SEC is a total of 240 days. There will be 3 public responses during this period, with intervals of 45 days, 45 days, 90 days, and 60 days, respectively. In other words, before the SEC issues the final decision (approval or rejection), the SEC has 3 opportunities to postpone the application result. At the same time, the SEC has the right to approve or reject the application at any time during the resolution process.
The specific application process for Bitcoin spot ETFs is as follows:
Taking BlackRock as an example, the SEC published the 19b-4 rule change document for iShares Bitcoin Trust in the Federal Register on July 19. Therefore, the deadline for the first response for iShares Bitcoin Trust is September 2, which is 45 days after July 19. If the SEC decides to postpone the resolution time before this deadline, the next response will be postponed for another 45 days. The final response date for iShares Bitcoin Trust is March 15, 2024, 240 days later.
Below, we list the specific application information of these 8 institutions, including the project name, listing exchange, sponsor, trustee, custodian, application-related time, and historical application status.
BlackRock
Project Name: iShares Bitcoin Trust
Exchange: Nasdaq
Sponsor: BlackRock Fund Advisors
Trustee: Delaware statutory trust
Bitcoin Custodian: Coinbase Custody Trust Company, LLC
Cash Custodian: Bank of New York Mellon
Among them, the Bitcoin custodian and cash custodian are collectively referred to as custodians.
Application Related Time:
Nasdaq submitted a proposed rule change to the SEC on June 29, 2023.
The notification was published on the Federal Register on July 19.
First reply date: September 2.
Historical Application Status: None
Fidelity
Application Project: Wise Origin Bitcoin Trust
Exchange: Cboe BZX
Sponsor: FD Funds Management LLC
Trustee: Delaware Trust Company
Manager: Fidelity Service Company, Inc. (FSC)
Transfer Assistant: Third-party organization (no specific information available)
Market Agent: Fidelity Distributors Corporation
Bitcoin Custodian: Fidelity Digital Assets Services, LLC (FDAS)
Application Related Time:
Cboe BZX submitted a proposed rule change to the SEC on June 30, 2023.
The notification was published on the Federal Register on July 19.
First reply date: September 2.
Historical Application Status:
Fidelity submitted a spot ETF application in May 2021 and was rejected in February 2022.
ArkInvest
Application Project: ARK 21Shares Bitcoin ETF
Exchange: Cboe BZX
Sponsor: 21Shares US LLC
Trustee: Delaware Trust Company
Cash Custodian (Transfer Agent): Bank of New York Mellon
Manager: Bank of New York Mellon
Market Agent: Foreside Global Services, LLC
Custodian: Coinbase Custody Trust Company, LLC
Market Assistant: ARK Investment Management LLC
Application Related Time:
Cboe BZX submitted a proposed rule change to the SEC on April 25, 2023.
The notification was published on the Federal Register on May 15.
First reply date: June 29 (SEC decided to postpone the decision).
Reason for rejection: The committee believes that more time is needed to review the issues in the proposed rule change, so the decision is postponed.
On June 30, the exchange submitted Amendment No. 2; on July 11, it submitted Amendment No. 3.
Second reply date: August 13 (SEC decided to postpone the decision).
On August 11, the SEC issued a document soliciting comments on Amendment No. 3, further delaying the decision.
Historical Application Status:
Ark Invest previously submitted two spot ETF applications, in 2021 and 2022, both of which were rejected.
Invesco
Project: Invesco Galaxy Bitcoin ETF
The word “Galaxy” in the name comes from the fact that this ETF tracks the Bloomberg Galaxy Bitcoin Index
Exchange: Cboe BZX
Sponsor: Invesco Capital Management LLC
Trustee: Delaware Trust ComLianGuainy
Custodian: Third-party trust companies and qualified custodians in the United States (no specific information available)
Manager: Mature global fund manager (no specific information available)
Transfer Agent: Third-party institution (no specific information available)
Application Timeline:
Cboe BZX filed a proposed rule change with the SEC on June 30, 2023.
The notice was published on the Federal Register on July 19.
First response date: September 2
Historical Application:
Invesco and Galaxy jointly submitted an application for a spot ETF in September 2021, which was subsequently withdrawn.
WisdomTree
Project: WisdomTree Bitcoin Trust
Exchange: Cboe BZX
Sponsor: WisdomTree Digital Commodity Services, LLC
Trustee: Delaware Trust ComLianGuainy
Manager/Transfer Agent: U.S. Bank Global Fund Services
Custodian: U.S. Bank, National Association
Application Timeline:
Cboe BZX filed a proposed rule change with the SEC on June 30, 2023.
The notice was published on the Federal Register on July 19.
First response date: September 2
Historical Application:
WisdomTree previously submitted two applications for spot ETFs, in March 2021 and January 2022, both of which were rejected.
VanEck
Project: VanEck Bitcoin Trust
Exchange: Cboe BZX
Sponsor: VanEck Digital Assets, LLC
Trustee: Delaware Trust ComLianGuainy
Manager/Transfer Agent: The State Street Bank and Trust ComLianGuainy
Marketing Assistant: Van Eck Securities Corporation
Bitcoin Custodian: Third-party qualified custodian (no specific information available)
Application Timeline:
Cboe BZX filed a proposed rule change with the SEC on June 30, 2023.
The notice was published on the Federal Register on July 19.
First response date: September 2
Historical Application:
VanEck first submitted a spot Bitcoin ETF application in June 2018 and withdrew it in September 2019. Subsequently, VanEck submitted spot ETF applications in March 2021 and June 2022, both of which were rejected.
Bitwise
Project: Bitwise Bitcoin ETP Trust
Exchange: NYSEArca
Sponsor: Bitwise Investment Advisers, LLC
Trustee: Delaware Trust ComLianGuainy
Cash Custodian (Transfer Agent): Third-party service provider (no clear information yet)
Bitcoin Custodian: Third-party custodian (no clear information yet)
Application Timeline:
NYSE Arca submitted the proposed rule change to the SEC on June 28, 2023.
The notice was published on the Federal Register on July 18.
First reply date: September 1
Historical Application Status:
Bitwise submitted a spot ETF application in October 2021 and was rejected in June 2022.
Valkyrie
Application: Valkyrie Bitcoin Fund
Exchange: Nasdaq
Sponsor: Valkyrie Digital Assets, LLC
Trustee: Delaware Trust ComLianGuainy
Bitcoin Custodian: Third-party qualified custodian (no clear information yet)
Manager/Transfer Agent: U.S. Bank Global Fund Services
Application Timeline:
Nasdaq submitted the proposed rule change to the SEC on July 3, 2023.
The notice was published on the Federal Register on July 21.
First reply date: September 4
Historical Application Status:
Valkyrie submitted a spot ETF application in April 2021 and was rejected in December 2021.
All the above information is from the SEC Federal Register.
Summary
-
ARK 21Shares Bitcoin ETF by Ark Invest is the earliest spot ETF application in this round, which has undergone two replies and both encountered delays. The remaining ETFs will receive their first reply in early September.
-
Except for BlackRock, all other companies have experience in applying for bitcoin spot ETFs. Among them, VanEck has the most experience. It has had three applications for bitcoin spot ETFs since 2018.
-
All 8 ETF application documents have added the rejection reason mentioned repeatedly in the previous 2021 applications, which is the Surveillance Sharing Agreement (SSA).
-
All 8 ETF applications propose trading on one of the three exchanges: Nasdaq, Cboe BZX, and NYSE Arca. Among them, Cboe BZX has the largest proportion in the applications, accounting for 5 out of 8. This may be related to Cboe BZX’s positive attitude towards cryptocurrencies and their derivatives.
-
The level of detail in the 8 ETF application documents varies slightly. For example, Valkyrie and VanEck have not disclosed detailed custodian information.
II. Can Bitcoin Spot ETFs be successfully approved?
There is a high probability of success for the current round of Bitcoin spot ETF applications. The main reasons are the high success rate of BlackRock’s ETF applications and the inclusion of the Surveillance Sharing Agreement (SSA).
-
BlackRock ETF Approval Rate
BlackRock is known for issuing index-tracking funds. Its flagship fund (iShares) has a market share of nearly 50% in the US ETF market. BlackRock has extensive experience and a high success rate in obtaining ETF approvals. According to statistics, its ETF approval rate is almost 100%, with a total of 575 out of 576 applications approved. The only failure was a jointly submitted actively managed ETF by BlackRock and Precidian Investments, which was rejected by the SEC due to a lack of transparency in profitability.
-
Surveillance-Sharing Agreement (SSA)
All 8 institutions included the Surveillance-Sharing Agreement (SSA) in their ETF applications, which was previously mentioned as a reason for the repeated rejection of Bitcoin spot ETFs.
The SSA, short for Surveillance-Sharing Agreement, is an agreement between cryptocurrency exchanges and market regulatory agencies. This agreement allows both parties to share trading data and information for monitoring purposes. If suspicious trading data or information is detected, it will be simultaneously shared with regulatory agencies, ETF issuers, and exchanges. The SSA is commonly used in cases involving financial products such as ETFs. It can enhance the effectiveness of financial market monitoring and help regulatory agencies detect market manipulation, fraudulent activities, and other improper trading behaviors.
The inclusion of the SSA in this round of applications is likely to loosen the SEC’s stance on fraud prevention and market manipulation. At the very least, the SEC cannot provide the same rejection reasons as in 2021.
Which ETFs have a higher chance of approval
Based on the application dates, except for Ark Invest, all 8 institutions submitted their applications to the SEC almost at the same time. This raises suspicions about whether they have received some information suggesting that the SEC may approve the issuance of Bitcoin spot ETFs this year. Of course, we cannot verify the existence of such information. But the attitude conveyed in the process is undoubtedly positive.
Moreover, since the reply dates are all very close, it is highly likely that multiple ETFs will be approved or delayed at the same time. The proposed rule changes in these ETF filings are quite similar and all include the surveillance-sharing agreement (SSA). Therefore, the SEC has no reason to reject one and approve another. In other words, if BlackRock’s Bitcoin spot ETF is approved, there is a high probability that the ETF applications submitted by other institutions will be approved as well.
III. Predicted Approval Time
Based on the previous approval process of Bitcoin spot ETFs, the probability of these ETFs being approved in the first or second reply is very low. The SEC typically chooses to take the full 240 days to review Bitcoin spot ETF applications before making a rejection decision. Although the SEC cannot use the same reasons to reject spot ETF applications this time, due to its consistent attitude towards the crypto market, it is likely to search for other reasons to delay the application replies. Finally, a decision will be made close to the final reply date.
On the other hand, the choice of Bitcoin custodian in ETFs may also be a key factor influencing the SEC’s decision. For Bitcoin spot ETFs, the Bitcoin custodian needs to have sufficient influence and experience in the cryptocurrency field and be recognized by the SEC (able to be supervised by the regulatory authority). For example, BlackRock explicitly stated in its ETF application that it would use Coinbase as the Bitcoin custodian. However, Coinbase’s previous litigation with the SEC may to some extent affect the final decision of the application. Although this litigation is not fundamentally related to Bitcoin, it could result in a delay in the application.
Therefore, we predict that the most likely time for this round of Bitcoin spot ETFs to be approved will be 240 days after the announcement of the Federal Register 19b-4, which is the final reply date.
Based on the publication time of each ETF application’s rule change document in the Federal Register, the possible approval times for the 8 institutional ETFs are as follows:
