Blockworks: The ten-year road to spot Bitcoin ETF application

Author: Ben Strack, Blockworks; Compiler: Songxue, Golden Finance

In the coming days, the U.S. Securities and Exchange Commission may finally approve an ETF that directly holds Bitcoin.

After a decade-long effort by fund issuers, this potential approval would represent an important step in legitimizing the blockchain asset class.

Optimism about this possibility has grown in recent months, so let’s take a look at how the industry got to this stage.

Try to start

Cameron and Tyler Winklevoss applied to establish the Winklevoss Bitcoin Trust on July 1, 2013 fund. At the time, the price of Bitcoin was around $100.

The fund, offered by sister company Math-Based Asset Services, is designed to hold BTC and store it through an initially unnamed custodian.

The 2013 filing said, "The sponsors believe the trust is the first exchange-traded product designed to track the price of a digital-based asset such as Bitcoin."

U.S. Securities The Exchange Commission (SEC) denied Winklevoss’ application in 2017, stating that the lack of regulation of the Bitcoin market raised “concerns about potentially fraudulent or manipulative acts and practices.”

Other filings, denials

Others have made similar attempts to Winklevoss, but not all Everyone has entered the denial stage.

Grayscale Investments, best known for its Bitcoin Trust (GBTC), first filed for a Bitcoin ETF in 2016 and "spent much of 2017 in conversations with the SEC," the company said in a statement. said in an SEC disclosure.

The company stated in the filing: “Ultimately, we withdrew our application because we believe that the regulatory environment for digital assets has not developed to the extent that such products can be successfully brought to market.”

< Cryptocurrency-focused asset manager Bitwise applied for a physically-backed Bitcoin ETF in 2019 but withdrew its request in January 2020 due to SEC concerns. The company would launch another bid in October 2021, but was unsuccessful.

In fact, securities regulators will continue to reject spot applications for Bitcoin ETFs on grounds similar to their ruling on the Winklevoss Bitcoin Trust.

In its November 2021 decision on VanEck’s proposed scheme fund, the SEC said Cboe BZX Exchange “has not determined that other means are adequate to protect against fraudulent and manipulative acts and practices.” The regulator added, The proposed ETF trading exchange does not have a comprehensive oversight-sharing agreement with “a sizable regulated market relevant to Bitcoin.”

The ruling comes a month after the SEC allowed ETFs that invest in Bitcoin futures contracts to begin trading in October 2021.

Grayscale, VanEck and Bitwise are among a dozen issuers currently filing Bitcoin ETF applications with the SEC. The latter has continued to publish research over the years in response to rebuttals to various Bitcoin ETF applications.

BlackRock joins the fray as part of latest wave

Some fund issuers are not deterred by rejection And stay away. One asset management giant has even decided to try a spot Bitcoin ETF.

Ark Invest and 21Shares launched the latest wave of Bitcoin ETF approval applications in April 2023, after first joining forces to launch such funds in 2021.

The SEC keeps denying, denying, denying, and we just keep filing, filing, filing," Ark Invest CEO Cathie Wood said during a webinar last month. "I'm very Thanks to 21Shares for pushing us in this direction. ”

BlackRock raised eyebrows last June when it revealed its intention to launch a Bitcoin ETF. The fund giant manages more than $9 trillion in assets, and only one proposed ETF has been SEC declined.

CoinShares head of product Townsend Lansing wrote in an August blog post that the SEC could be subject to additional “politics” given the involvement of traditional financial giants like BlackRock. Push” to approve a spot Bitcoin ETF.

Like BlackRock, financial services giant Fidelity also filed an application with U.S. securities regulators for a spot Bitcoin ETF.

Grayscale sued the SEC and later won

Some industry observers believe that Grayscale’s court action against the U.S. Securities and Exchange Commission (SEC) in August The victory makes approval of a U.S. spot Bitcoin ETF more likely. The SEC chose not to appeal the decision.

The regulator denied the company’s proposal to convert GBTC into an ETF in 2022. In response, Grayscale sued the SEC.

The judge in the case ruled that the SEC's decision to block the conversion but approve a Bitcoin futures ETF was "arbitrary and capricious."

While the ruling does not force the SEC to approve GBTC's change to an ETF, regulators would have to reject such action on different grounds. Grayscale continues to revise its application in preparation for a potential conversion.

“Pattern breakthrough” obvious

Ophelia Snyder, president of 21Shares, said in November that a “pattern” emerged in the latest wave of Bitcoin ETF applications "Breakthrough" - issuers are providing more details about how the fund operates.

"This is really positive because, quite frankly, changes in behavior may actually lead to changes in outcomes, It’s really exciting,” she said at the time.

Most recently, multiple fund groups last week named Jane Street, J.P. Morgan Securities and others as authorized participants for their planned Bitcoin funds .

If such an ETF is approved, such entities would be used to create and redeem fund shares.

Bitcoin-centric advertising has also begun to proliferate.

Bitwise launched a number of ads last month starring actor Jonathan Goldsmith. Hashdex and VanEck followed suit with their own efforts — marking the beginning stages of what is expected to be a marketing battle if a spot Bitcoin ETF is approved.