Bitwise updates Bitcoin ETF application with detailed arguments.

Bitwise updates Bitcoin ETF application with detailed arguments.

The Battle for a Bitcoin ETF: Bitwise Upgrades Application Amid SEC Objections

The world of cryptocurrencies has long awaited the approval of a Bitcoin exchange-traded fund (ETF) in the United States. Bitwise Asset Management, along with five other financial firms, had its spot Bitcoin ETF application put on hold by the United States Securities and Exchange Commission (SEC). In response, Bitwise has filed an amended application, consisting of 40 pages of text addressing the SEC’s objections. Despite these efforts, a Bitwise executive has cautioned that it may still not be enough to meet regulatory requirements.

The delay in the consideration of the spot BTC ETF applications by the SEC stemmed from a court ruling that overturned the agency’s rejection of Grayscale Investments’ application. Grayscale had sought to convert its over-the-counter Grayscale Bitcoin Trust into a listed BTC ETF. This ruling introduced a new dynamic to the Bitcoin ETF landscape, prompting Bitwise’s chief investment officer, Matt Hougan, to speculate on the potential outcomes. Should the SEC appeal the Grayscale ruling, Hougan notes that “we return to the status quo.” In this scenario, the key requirement becomes proving the Chicago Mercantile Exchange’s (CME) Bitcoin futures market as the dominant source of price discovery in order to serve as a “regulated market of significant size” for surveillance purposes.

With this in mind, Bitwise’s amended application aimed to address the SEC’s concerns regarding the “mixed” or “inconclusive” academic research on the lead-lag relationship between BTC futures and spot markets. To do so, Bitwise reviewed the academic studies cited in 11 previous SEC disapproval orders for spot BTC ETFs. The company confidently asserted that the data convincingly demonstrate the CME’s leading role in price discovery. By engaging with the SEC’s objections and presenting well-designed academic studies, Bitwise aimed to establish that the CME is indeed “significant.”

The conclusions reached in Bitwise’s amended application hold significant relevance for meeting the SEC’s requirements. The agency stipulates that a listing exchange must have a surveillance-sharing agreement with a regulated market, such as the CME BTC futures market, which is deemed “of significant size.” This requirement comes into effect if the exchange fails to establish other means to prevent fraudulent and manipulative acts. Previous applicants have struggled to meet this requirement. Bitwise’s efforts in demonstrating the CME’s significance and addressing the SEC’s objections are thus crucial for the success of their application.

However, despite the positive implications of surveillance-sharing agreements with spot exchanges, Hougan warns that they may not fully satisfy the technical regulatory requirements. The journey towards a Bitcoin ETF remains challenging, with the SEC demanding rigorous evidence of market oversight and investor protections. While Bitwise’s amended application represents a significant step forward, the company and other applicants must continue to navigate the regulatory landscape carefully.

The battle for a Bitcoin ETF in the United States is far from over, but Bitwise’s efforts to address the SEC’s objections with enhanced research and data provide hope for the industry. As the cryptocurrency market continues to evolve, the importance of establishing well-regulated investment vehicles like ETFs becomes increasingly clear. These vehicles provide investors with the opportunity to participate in the cryptocurrency market in a transparent and secure manner. While the road to regulatory approval may be long and challenging, the potential benefits of a Bitcoin ETF cannot be overstated.

Key Points:

  • Bitwise Asset Management has filed an amended application for a spot Bitcoin ETF, addressing the United States Securities and Exchange Commission’s objections.
  • The SEC had previously delayed the consideration of spot BTC ETF applications following a court ruling on Grayscale Investments’ application.
  • The amended application focuses on proving the Chicago Mercantile Exchange’s dominance in price discovery and addressing objections raised by the SEC.
  • Meeting the SEC’s requirements is vital, as a surveillance-sharing agreement with a regulated market “of significant size” is necessary for approval.
  • Bitwise’s efforts represent a step forward, but caution is warranted as the technical regulatory requirements may not be fully satisfied.
  • The industry’s pursuit of a Bitcoin ETF is indicative of the need for well-regulated investment vehicles in the cryptocurrency market.
  • Approval of a Bitcoin ETF would offer investors a transparent and secure means of participating in the market.