SEC Puts on Hold Decisions on Two Bitcoin ETF Applications

The US Securities and Exchange Commission (SEC) has once again deferred its decision on whether to approve Bitcoin ETFs proposed by asset manager Bitwise and the granddaddy of crypto funds, Grayscale.

Applications to launch the Bitwise Bitcoin ETP Trust and Grayscale Bitcoin Trust were set back by 45 days, putting off until February the first decision on a proposed rule change that would allow the listing and trading of such investment vehicles.

Bitwise, a San Francisco-based firm, has filed its initial registration earlier in October, joining the race to launch a physically-backed bitcoin exchange-traded fund (ETF). The proposed fund would trade spot bitcoin instead of BTC futures, as most filings have recently sought to do.

If approved, NYSE Arca, the exchange owned and operated by the ‎Intercontinental Exchange (ICE)‎‏,‏ would host the proposed listing while Bitwise Index Services will produce and manage the bitcoin ETF.

Bitwise made its first physical bitcoin ETF filing two years ago, which was later rejected by the US top watchdog, as were all proposals for physical bitcoin ETFs made around that time.

However, Bitwise global head of ETF products said earlier that he didn’t think the SEC will be in a rush to approve a cryptocurrency-based ETF, but his company is excited to talk to regulators about what his firm has to offer.

In a 76-page statement released today, the agency states that the applicants failed to meet the necessary requirements, particularly those related to market manipulation and illicit activities. This is similar to the justification the SEC gave when it turned down the Bitcoin-based ETF proposals submitted by many issuers.

Grayscale Investments, the world’s largest digital currency asset manager, also filed with the SEC in October to convert its Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF.

Exchange-traded funds usually track an index or group of assets but trade like stocks. ETFs differ from mutual funds, in which the manager generally attempts to beat the market’s performance, which often comes with higher fees and taxes.

So far, there have been nine other bitcoin ETFs filed with the SEC, but the agency has dashed hopes for these regulated investment vehicles with its constant rejections.

Despite investor interest, it seems unlikely that the US top regulator would be comfortable using bitcoin as an underlying asset in a regulated investment vehicle any time soon.

The SEC last month again postponed a decision to approve four proposals, leaving the title for the first approved BTC exchange-traded product still empty. The latest rejection comes as SEC Chairman Gary Gensler has called for more regulation of cryptocurrency exchanges to prevent fraud and other issues.