The Securities and Exchange Commission (SEC) in the US, on Friday, rejected the first spot bitcoin-based ETF for which the company VanEck had filed for approval sometime back which led to a minor shockwave in the markets.
The SEC had quoted the risk of manipulation and frauds happening in such ETFs and the underlying and it said that it wasn’t satisfied with the measures quoted by the company for prevention of such frauds and hence the commission had decided to reject the ETF. It was generally expected, among the large investors, that this ETF would be rejected by the SEC as it was spot based unlike the others that were approved as they were futures-based, The futures are derived from the spot and the trading and strategies used are pretty much the same everywhere while the spot Bitcoin pricing and trading are always difficult because the instrument is one of the most volatile ones around with not much of oversight as well. This would have rankled the SEC as they continue to view the crypto industry with suspicion.
It is interesting to note that VanEck had also applied for a Bitcoin futures-based ETF which has been approved by the SEC but so far, it has not launched it for trading. There were a couple of other such ETFs which have been approved last month and they have been trading in the markets with a lot of interest and demand as well. The Bitcoin ETF approvals had long been pending causing a lot of suspicion in the market on whether they would be approved but the SEC went ahead with the first set of approvals last month which enabled the rollout of the 2 ETFs. It is expected that more similar ETFs would receive approvals in the coming weeks which should help to bring in a lot of investments into the market.
This would help to push the prices of Bitcoin higher initially but would ultimately help to settle the prices down which would also help to reduce the volatility in the spot market. Till that time, it is unlikely that the SEC would be in a position to approve any ETFs that are spot bitcoin-based.
