According to a research study published on Monday by brokerage company Bernstein, the Securities and Exchange Commission’s (SEC) position on spot bitcoin (BTC) exchange-traded funds (ETF) is a challenging one to hold and the likelihood of approval is pretty high.According to Bernstein, the SEC recently approved leverage-based futures ETFs on the basis that futures pricing originates from a regulated exchange like the CME. The SEC has previously permitted futures-based bitcoin ETFs.
The SEC feels that a spot bitcoin ETF would not be reliable because “spot exchanges (like Coinbase) are not under its regulation, and therefore spot prices are not reliable and prone to manipulation,” according to experts lead by Gautam Chhugani.Several applications for a spot bitcoin ETF have been submitted, but the regulator has not yet approved any.Last month, a division of Blackrock submitted the necessary paperwork to establish a spot bitcoin ETF.This spurred other asset managers to seek or reapply for a bitcoin ETF product, including Invesco and Wisdom Tree.
The report mentioned Grayscale’s ongoing appeals court case about its attempt to convert its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF).“The court did not sound convinced that the futures price is not derived from the spot price, and thus to allow a futures based ETF and not allow spot sounds like a difficult pill to swallow for the courts,” noted the analysts.The source added that the market has now also proposed a surveillance arrangement between the operator of the spot exchange and a regulated exchange like Nasdaq.
The broker claimed that because there isn’t a bitcoin spot ETF, over-the-counter products like the Grayscale Bitcoin Trust (GBTC) are becoming more popular and are more expensive, illiquid, and ineffective.Digital Currency Group (DCG), the parent firm of CoinDesk, owns Grayscale.“SEC would rather bring in a regulated bitcoin ETF led by more mainstream Wall Street participants and with surveillance from existing regulated exchanges, than having to deal with a Grayscale OTC product filling the institutional gap,” the report stated.