On Friday, the US Securities and Exchange Commission (SEC) rejected the proposal of a Bitcoin spot ETF. The agency has repeatedly rejected similar applications in the past eight years. But after the debut of the first Bitcoin futures ETF last month, expectations for the final approval of this product have increased, boosting Bitcoin to an all-time high of $69,000 on Wednesday.
Once the news was released, the price of Bitcoin dropped rapidly, as low as $62,278.
The above application was submitted in March by Cboe BZX, a stock exchange under the Chicago Board of Options Exchange (CBOE), for the public listing and trading of VanEck Bitcoin Spot ETF. Consistent with market expectations, the SEC refused to approve the VanEck Bitcoin spot ETF application. This is the first time the SEC has made a ruling on this issue since the launch of the first batch of Bitcoin futures ETFs.
In Friday’s ruling, the SEC reiterated its long-standing concern that using Bitcoin spot prices as the basis of financial products may violate securities regulations because the market is too easily manipulated.
The SEC stated:
“The committee has always required that the major listed exchanges of Bitcoin ETFs need to reach a comprehensive and regulated agreement with the Bitcoin market, or have sufficient measures to prove that it can prevent fraud and manipulation.”
Its decision is based on the need to protect investors and the public interest. This statement is consistent with the SEC’s previous reasons for rejecting the Bitcoin spot ETF proposal.
VanEck owns a Bitcoin futures ETF, which has been validated by the SEC since October 23, but it has not yet started trading. The company’s CEO, Jan van Eck, said:
“We are clearly disappointed by the SEC’s refusal to approve our Bitcoin spot ETF today. We still believe that investors should gain access through regulated investment products. Bitcoin, not futures ETFs, is a better investment method.”
Last month, ProShares launched one of the most sought after ETFs in history, the Bitcoin Futures ETF (BITO). So far, the company has accumulated $1.4 billion in assets, which shows that investors are very interested in cryptocurrency ETFs. The fund holds futures contracts traded on the Chicago Mercantile Exchange Group (CME Group) floor, which is regulated by the Commodity Futures Trading Commission (CFTC).
SEC Chairman Gary Gensler stated that he is assured of Bitcoin futures ETFs because Bitcoin futures trading is conducted on strictly regulated exchanges, which is not the case with spot Bitcoin.
Many investors believe that these futures-based ETF products are not as beneficial as ETFs that directly track the Bitcoin spot, but some people see this attempt as an important step in the formalization of Bitcoin.
Soon after the SEC made it clear that they were more affirmative of bitcoin-based futures products, a large number of futures ETF applications appeared this year.
Currently, the Commonwealth of Canada and several European countries have approved spot cryptocurrency ETFs, and VanEck is expected to soon launch the first such product in Australia, which is also the Commonwealth.