Digital

US SEC Raises Concerns over Spot Bitcoin ETF Applications by Asset Managers

© Thomson Reuters 2023 

The US Securities and Exchange Commission (SEC) has expressed its reservations regarding recent applications for spot bitcoin exchange-traded funds (ETFs) filed by asset managers, citing insufficient clarity and comprehensiveness. The applications were submitted through exchanges Nasdaq and Cboe Global Markets on behalf of prominent firms such as BlackRock and Fidelity. This development comes as a blow to investor hopes for the approval of a bitcoin ETF, as well as the broader cryptocurrency market, which had experienced a resurgence of interest following these filings.

SEC’s Concerns and Communication with Exchanges:

According to a source familiar with the matter, the SEC has conveyed its concerns to Nasdaq and Cboe Global Markets regarding the ETF applications. The regulatory body found the filings lacking in terms of meeting the required standards to prevent fraudulent and manipulative practices and safeguard the interests of investors and the public. The SEC’s engagement with the exchanges underscores the importance of ensuring that any potential ETFs comply with the established regulations and provide robust protection measures.

Impact on Bitcoin and Cryptocurrency Market:

The news of the SEC’s rejection of the applications caused a temporary decline in the price of bitcoin. The world’s largest cryptocurrency experienced a 1 percent drop, settling at $30,142. Investors had hoped that the involvement of major asset management firms like BlackRock and Fidelity would pave the way for the approval of a bitcoin ETF. The setback highlights the ongoing challenges faced by cryptocurrency markets and the need for regulatory clarity and approval.

Past Rejections and Efforts to Address Concerns:

The SEC has consistently rejected numerous spot bitcoin ETF applications over the years, including one from Fidelity in January 2022. The regulatory body cited the failure of these filings to meet the necessary standards in preventing fraudulent activities and safeguarding investors’ interests. In an attempt to address these concerns, the recent filings by BlackRock and Fidelity proposed the implementation of a surveillance mechanism aimed at preventing manipulation. However, the applications did not specify which bitcoin exchange would be involved in this process.

Market Reaction and Impact on Blockchain-related Stocks:

Following the SEC’s decision, stocks associated with blockchain and cryptocurrency witnessed a decline. Companies such as Coinbase, Riot Platforms, and Marathon Digital recorded decreases ranging from 3 percent to 3.7 percent. The rejection of the ETF applications has raised questions about the future direction of the cryptocurrency market, as investor sentiment is influenced by regulatory decisions and the ability to offer institutional-grade investment vehicles.

Conclusion:

The SEC’s criticism of recent spot bitcoin ETF applications filed by asset managers through Nasdaq and Cboe Global Markets highlights the regulatory challenges faced by the cryptocurrency market. Despite hopes for increased mainstream adoption, the SEC emphasized the need for filings to meet stringent standards to protect investors and the public interest. The setback serves as a reminder of the importance of regulatory clarity and robust safeguards in facilitating the growth of digital assets within a secure and compliant framework.

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