On September 28, the U.S. Securities and Exchange Commission (SEC) filed critical documents related to pending spot Bitcoin exchange-traded funds (ETFs). These filings serve as formal orders initiating proceedings to determine whether proposed rule changes should be approved or rejected. If these rule changes receive approval, it could open the door for spot Bitcoin ETFs to be traded on commodities exchanges, marking a significant development in the cryptocurrency market.
The SEC is now inviting public comments on various aspects of these pending Bitcoin ETFs through these filings. In the first section, the SEC seeks opinions on whether the proposed spot Bitcoin ETFs are susceptible to fraud and market manipulation or have mechanisms to prevent such issues.
In another section, the SEC solicits input on specific characteristics of Bitcoin, including its geographically distributed trading activity, relatively slower transaction speed, and the amount of capital required for substantial participation on trading platforms. The regulator is inquiring whether these attributes inherently make the Bitcoin market resistant to manipulation.
Furthermore, the SEC is inquiring about the effectiveness of a surveillance-sharing agreement with Coinbase in detecting, investigating, and preventing fraud. Several pending ETFs have incorporated such agreements with Coinbase through amendments made in mid-July.
The SEC also seeks feedback on whether the Chicago Mercantile Exchange (CME) represents a regulated market of substantial size compared to the spot Bitcoin market. Additionally, it wants insights into the correlation between Bitcoin spot markets and the CME Bitcoin futures market. It’s worth noting that the SEC has previously approved Bitcoin futures ETFs, which could influence its stance on spot Bitcoin ETFs.
Notably, the SEC has published orders for multiple ETFs simultaneously. Two filings pertain to proposals from BlackRock (iShares) and Valkyrie, both aiming for Nasdaq listings. Another order concerns an Invesco Galaxy proposal targeting a Cboe BZX listing.
However, the most extensive order is related to Bitwise’s spot Bitcoin ETF proposal, which differs from BlackRock’s filing and seeks a listing through NYSE Arca. This order spans 88 pages, unlike the shorter eight-page orders for other ETFs. Bitwise recently bolstered its filing with an additional 40 pages of material.
It’s important to note that these filings do not explicitly delay the SEC’s decision on the pending applications. Nevertheless, the substantial amount of information sought by the SEC could extend the proceedings. The SEC could either delay its decision further or reject the proposals outright. In the latter case, applicants could resubmit new applications and restart the regulatory process. The titles of the orders may suggest potential approval, but the filings also include cautionary language indicating that disapproval is under consideration, with no final decisions reached at this stage
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