The U.S. Securities and Exchange Commission (SEC) has decided to postpone its verdict on spot Bitcoin exchange-traded fund (ETF) applications from seven prominent firms. This development comes amidst mounting pressure on the agency to greenlight a variety of digital asset ETF products. The delay, announced on August 31, effectively extends the timeline for WisdomTree Inc., Invesco, Valkyrie Funds, Bitwise Asset Management Inc., Fidelity Investments, VanEck, and BlackRock Inc. to receive approval or denial for their respective spot Bitcoin ETF proposals. The SEC has earmarked mid-October as the tentative decision deadline, although further extensions are possible.
The SEC justified its decision by stating that it required more time to “consider the proposed rule change and the issues raised therein.” This pause in proceedings follows the SEC’s recent loss in a significant lawsuit against cryptocurrency investment firm Grayscale Investments.
SEC’s Historical Stance on Physical Bitcoin ETFs
Historically, the SEC, under the leadership of Chairman Gary Gensler, has been reluctant to approve ETFs linked to physical Bitcoin, favoring Bitcoin futures contracts instead. Notably, the SEC has rejected over 30 proposals of this nature since 2021, demonstrating a consistent stance. Currently, the largest Bitcoin futures ETF is the ProShares Bitcoin Strategy ETF (BITO), boasting assets totaling $1.1 billion.
While the court ruling challenges the SEC’s previous stance, the path for spot Bitcoin ETFs remains uncertain. The agency can continue to deliberate on forthcoming applications or opt to appeal the Grayscale case. Specific deadlines have been set for certain ETFs, such as Wisdom Tree’s and Fidelity’s Wise Origin Trust, with decisions due by October 17. Valkyrie’s application deadline is October 19, and Bitwise’s is October 16. However, the SEC retains the flexibility to extend its decision-making process for up to 240 days.
Market Reaction
The announcement of the delay had an immediate impact on the price of Bitcoin, which dropped below $26,000 on the same day. While many of the entities pursuing spot Bitcoin ETFs are digital asset investment firms, such as Bitwise and Grayscale, traditional financial institutions like BlackRock have significantly altered the landscape by joining the race to introduce these products. This expansion of interest underscores the growing importance and appeal of Bitcoin ETFs within the broader financial industry.
