SEC Postpones Decision on Spot Bitcoin ETFs from BlackRock and Others
The United States Securities and Exchange Commission (SEC) has postponed its decision on Bitcoin ETFs.
U.S. Representatives Mike Flood, Ritchie Torres, Tom Emmer and Wiley Nickel have urged the SEC to approve crypto ETFs.
Bitcoin ETFs will enable individuals and institutions to invest in BTC in a legal way.
Keywords: SEC delays, spot Bitcoin ETFs, BlackRock ETF, Bitwise ETF, Valkyrie ETF, Invesco ETF, cryptocurrency regulation, SEC decision, cryptocurrency market, Bitcoin ETF approval, investment firms, regulatory environment, market reaction, ETF applications, cryptocurrency investment, financial regulation, cryptocurrency ETFs, crypto ETF, crypto regulation, crypto investments, invest in crypto, crypto market
Introduction
The crypto market has been anticipating the approval of crypto ETFs in the United States, something that could positively affect prices of many cryptocurrencies such as bitcoin and Ether (ETH). Of course, the approval of many ETFs is likely to create a positive crypto market sentiment.
This article discusses the possible reasons why the United States SEC postponed the approval of spot bitcoin exchange traded funds (ETFs).
SEC Delays Announcing its Decision on Cryptocurrency ETFs
The United States Securities and Exchange Commission (SEC) has postponed the announcement of its final decision on spot bitcoin ETFs. It has not declared its position on the various crypto ETFs including the BlackRock ETF, Bitwise ETF, Invesco ETF and Valkyrie ETF.
James Seyffart, a Bloomberg ETF analyst, believes that the SEC will push forward any other bitcoin ETF approval for the same reason, the expected government shutdown. As a result, the other investment firms like Fidelity and VanEck will have to wait longer to hear the SEC decision on their crypto ETF applications.
The latest SEC postponement on crypto ETFs application review and its decision announcement comes two weeks before the deadline for other applicants, earmarked for 16 to 19 October.
Some analysts also think that the SEC will also delay its review of the third set of deadlines due in January 2024. This means that the SEC is likely to make the decisions on Bitcoin ETF applications around mid-March 2024.
The latest SEC postponement of the decision on spot BTC ETF has dashed the hope of the crypto market that a few crypto ETFs would be approved this year.
Earlier on, Eric Balchunas, a Bloomberg ETF analyst, had speculated a 75% probability of spot bitcoin ETF approval in 2023. That was based on the unanimity of the U.S. Court of Appeals Circuit decision on the SEC vs. Grayscale case.
Despite the SEC decision delay on spot bitcoin ETFs the market reaction was neutral since the Bitcoin price did not fluctuate significantly following the news. As the next graph indicates, the bitcoin price has been steadily increasing over the past two weeks.
Bitcoin Price - CoinGecko
Basically, the BTC price increased by 3.84% within the last seven days, indicating an almost neutral response to the SEC’s decision to give a verdict on the bitcoin ETF applications. Currently, bitcoin is trading at $27,972.08.
Reasons for the Delays of SEC Decision on Bitcoin ETFs
According to Seyffart, the delay of SEC decision on spot Bitcoin ETFs could have been the expected government “shutdown on 1 October which would have disrupted the activities of federal agencies including the SEC.
The reason why many political and economic analysts had anticipated a shutdown was lack of consensus between the two chambers of congress, the House and Senate, on several funding bills. A failure to finalize at least 12 full-year funding bills by 1 October 2023 would have led to the shutdown of the government.
Bitcoin ETFs in the Crypto Market
Currently, the United States SEC has not approved any spot bitcoin ETF. Now, let’s take a few minutes to understand what a spot bitcoin ETF is.
Bitcoin ETF refers to an exchange traded fund that comprises assets that are related to bitcoin. Specifically, the BTC ETF tracks the value of bitcoin through spot markets and derivatives. This means that the value of BTC ETF rises when the price of bitcoin increases. On the contrary, its value falls when the price of bitcoin decreases.
Bitcoin ETFs enable individuals and institutions to invest in crypto without owning it. However, “crypto regulation” requires that a responsible government agency like the SEC approves it before its sale on the traditional financial market like the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE).
As per the financial regulation, if you invest in crypto ETF you agree to buy or sell bitcoin at a given price on a specific date irrespective of its market value on that day.
SEC’s Role in Regulating Financial Markets and Cryptocurrency Investment
The U.S. Securities and Exchange Commission (SEC) is a federal agency responsible for regulating the securities markets in the United States. In fact, the Securities Exchange Act of 1934, empowers the SEC to have oversight over all aspects of the securities markets. Therefore, it has the power to regulate, register and deregister securities.
It also controls and monitors the activities of transfer agents, brokerage firms and clearing agencies. Although the United States does not have a clear cryptocurrency regulation framework that deals with crypto securities, the SEC can use the existing financial regulations to oversee securities related to cryptocurrencies. This also means that it has a mandate to regulate some aspects of the cryptocurrency market.
That said, it is clear that the SEC has the legal responsibility to approve crypto ETFs like bitcoin and ETH ETFs. The focus of the SEC is to protect investors and to ensure that the securities market is functioning in an orderly and fair manner. Therefore, the SEC is doing much to maintain a fair and transparent regulatory environment.
How the Delay Fits into the Broader Stance on Crypto Regulation
The SEC delay on its ETF decision shows lack of clarity in the crypto sector. It also shows the different views of regulators on crypto securities. This is because recently, U.S. Representatives Mike Flood, Ritchie Torres, Tom Emmer and Wiley Nickel appealed to Gary Gensler, the SEC Chair, to approve spot bitcoin ETFs immediately.
The representatives’ view is that approving the bitcoin ETFs gives room for individuals and institutions to invest in bitcoin in a regulated way. Nevertheless, the SEC does not seem to see things with the same lenses.
The aim of the SEC in delaying the decision on BTC ETF might be to stamp its authority and control on the decentralized financial system. Through the delay the regulatory agency could be sending a message that there is need for strong oversight on the blockchain space.
Conclusion
There are several reasons that might have led the SEC to postpone its decision on bitcoin ETFs. The impending government shutdown and the SEC’s aim to control the decentralized sector might be the reasons for the delay. Irrespective of the SEC’s stance on bitcoin ETFs several U.S. Representatives have called upon the SEC to approve some crypto ETFs.
