Following its decision to disapprove Bats BZX Exchange’s proposed rule change for Coin ETF, the U.S Securities and Exchange Commission (SEC) now has two more Bitcoin ETFs to consider; Solidx Bitcoin Trust and Barry Silbert’s Bitcoin Investment Trust. The Commission has until March 30 to make a decision on the former while the latter is many months away.
Rejections Likely for Upcoming Bitcoin ETFs
The SEC’s decision to disapprove the proposed rule change for Coin ETF last Friday was primarily based on the nature of the bitcoin markets. The Commission claimed that Bats BZX Exchange must “have surveillance-sharing agreements with significant markets for trading” bitcoin or its derivatives and that those markets must be regulated for the rule change to be consistent with the Exchange Act. However, since “the Commission believes that the significant markets for bitcoin are unregulated”, the two criteria are not met.
The chance that significant markets for bitcoin will be regulated in the near future, if at all, is slim. The wider Bitcoin community has already come to understand this, and expects the Commission to reject the proposed rule change for Solidx Bitcoin Trust, as evident in chat rooms and forums online.
Confirming the community’s expectation is former Needham analyst, who is now Head of Research at Blockchain Capital LLC, Spencer Bogart. Citing how the grounds for disapproval of Coin ETF “were related to the dynamics of the underlying bitcoin markets” as opposed to something specific in the ETF filing, he told Bitcoin.com that:
The odds of approval are very low for both of the other two Bitcoin ETFs.
Bogart, who is famous for estimating a sub-25 percent chance of Coin ETF being approved by the SEC, now says that the chance for Solidx Bitcoin Trust is “extremely low”, noting that it is “likely to be rejected on the same grounds”.
Very Little Anyone Can Do
Furthermore, Bogart believes that both NYSE Arca and Solidx Management LLC, which is the sponsor of Solidx Bitcoin Trust, can do “very little” to better the chance of Solidx Bitcoin Trust being approved. Bogart said that he did not think NYSE Arca has a better chance of getting its rule change approved than Bats BZX Exchange, adding that:
NYSE would need to enter into “surveillance-sharing” agreements with all the major bitcoin exchanges around the world and they would need to have a reasonable chance of regulatory action against any manipulative trading activity that is detected. Both are unlikely.
Future Prospect of SEC’s Approval
The SEC noted on Friday that, in the future, “regulated bitcoin-related markets of significant size may develop” enough for a Bitcoin ETF to be approved. However, Bogart believes differently, stating that:
I don’t see the SEC approving a Bitcoin ETF for the foreseeable future. I think any major bitcoin investment products will need to be launched in other jurisdictions.
On February 24, NYSE Arca filed the first amendment to its proposed rule change relating to the listing and trading of shares of Solidx Bitcoin Trust under NYSE Arca Equities Rules 8.201. The comments are due on March 16. When the chance of approval is very low, exchanges sometimes withdraw their proposed rule changes. At press time, NYSE Arca has not done so and the Solidx team did not immediately respond to Bitcoin.com’s request for comment.
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Images courtesy of Shutterstock and the SEC
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