Last Updated: 11 June 2022
In July, the US financial watchdog SEC must decide on approving or disapproving two bitcoin ETFs. After months of pushing back the deadlines, there is no more delay and the SEC must come up with a decision.
BitWise and Grayscale
Both ETFs are based on the spot market, which means that the funds (ETF stands for exchange traded funds) must buy real bitcoins. Put these deadlines in your calendar:
- July 1: BitWise bitcoin ETF
- July 6: Grayscale bitcoin ETF
Bitwise has been working on a bitcoin ETF since 2019. The SEC nipped this first attempt in the bud, but a new application has now been filed and Matt Hougan of Bitwise is hopeful.
“There’s a perception in the crypto industry that the SEC is just saying no, and that’s now what the facts show.”
Matter of time for BitWise
Hougan spoke at a CoinDesk conference this week about the chances of a bitcoin ETF. He pointed out that the SEC has approved a limited interval market, a bitcoin futures ETF based on the 1940 Investment Act, and more recently two bitcoin futures ETFs based on the 1933 Investment Act.
This is not the same as a spot ETF, as the already approved ETFs are based on short and long contracts on the price of BTC and therefore do not need to buy real bitcoins directly. But according to Hougan, this is only a matter of time.
“That’s a progression that ends in a spot bitcoin ETF. So they really are making progress, just not at the pace the crypto community would like to see. But it’s wrong to see this as rejection.”
David LaValle, Global Head of ETFs at Grayscale, agreed. “It wasn’t that long ago that there was really a question of whether this would happen,” LaValle said. “And now it’s clearly a question of when it’s going to happen.”
If rejected, Grayscale wants to sue SEC
Suppose Grayscale’s ETF is rejected on July 6, they could sue the SEC. At least, that is the opinion of Eric Balchunas, senior ETF analyst at Bloomberg.
According to Balchunas, the SEC is likely to approve the application and Verrilli, a former employee of the Obama administration, will play a key role in it.
Good point re Grayscale hiring Obama's Solicitor General: they could be getting ready to sue the SEC if they don't get spot approval (which is due by 7/6 and is highly, highly unlikely). Grab the popcorn. https://t.co/gbgsJ4lldE
— Eric Balchunas (@EricBalchunas) June 9, 2022
“Good point is that Grayscale is hiring Obama’s attorney general: they could be preparing to sue the SEC if they don’t get approval (which must be filed by 7/6 and is highly, highly unlikely). Grab the popcorn.’
The analyst was responding to a tweet by Jake Chervinsky, a lawyer who noted that the SEC would not win a legal battle if Grayscale filed a lawsuit. According to Chervinsky, Grayscale has met all the qualifications to have the spot ETF approved.
“The SEC’s deadline to approve or reject the application to convert GBTC into an ETF is July 6. It should undoubtedly be approved. I don’t see how the SEC survives a legal challenge, if at all, especially under Don Verrilli’s leadership.”
Grayscale’s situation is slightly different from that of Bitwise. Grayscale already offers crypto funds but wants to convert them into an ETF.
In his role, Verrilli will serve as a senior strategist in the Bitcoin ETF application. During his tenure as US attorney general, Verrilli was the lead lawyer representing the government in numerous Supreme Court cases.
Grayscale CEO Michael Sonnenshein is ready for war with the US Securities and Exchange Commission. Sonnenshein told Bloomberg in March that Grayscale is prepared to take the SEC to court in the event of another rejection of their spot bitcoin ETF.
Approval to protect investors
According to Sonnenshein, it is not true that the SEC approves a bitcoin futures ETF and considers a spot bitcoin ETF too dangerous. This is mainly because a futures ETF is an investment product that does not directly follow the price of the underlying assets. Futures ETFs are investment products designed for professional investors.
The average investor may be confused by this and feel that by buying a bitcoin futures ETF they are investing in bitcoin. This can leave them with a very cold feeling. It is precisely for this reason that Sonnenshein believes it would be in the interest of investor protection to bring a spot bitcoin ETF to the market.