BlackRock's Spot Bitcoin ETF: The Path to Success Despite Early SEC Rejections

Bombolo | News and Media

In a recent development, BlackRock's bid for a spot Bitcoin exchange-traded fund (ETF) faced an early setback when the U.S. Security and Exchange Commission (SEC) rejected the filing on procedural grounds. However, Nasdaq executive Giang Bui, Head of U.S. Equities & ETPs, believes that this initial rejection should not be seen as a negative indicator for the eventual success of BlackRock's Bitcoin ETF. Let's delve into the details of this intriguing situation.

Also Read: BlackRock's $9.4 Trillion Clout: Unleashing Cryptocurrency's Potential with a Bitcoin ETF

1. The Beginning of BlackRock's Ambitious Venture

On June 15, BlackRock submitted an application for a spot Bitcoin ETF, marking its entry into the cryptocurrency market. Nasdaq, responsible for filing Form 19-b4 to propose the necessary rule changes for listing the product, played a pivotal role in this venture.

2. SEC's Early Rejection: A Procedural Hurdle

Just fifteen days later, on June 30, the SEC declared the filing inadequate, resulting in an early rejection. It's crucial to understand that this rejection primarily relates to regulatory procedural matters rather than the actual merits or potential viability of BlackRock's Bitcoin ETF.

3. Giang Bui's Reassuring Perspective

Giang Bui, Nasdaq's expert in U.S. Equities & ETPs, offered an optimistic viewpoint on the situation. According to Bui, "Once the exchange files [19-b4], the SEC has seven business days to reject it if it determines that it doesn't comply with the SEC rules related to form. The rejection at that stage is purely procedural, rather than an indication of viability of the product."

Also Read: The Potential $150 Billion Boost: BlackRock's Bitcoin ETF and Its Impact on the Market

4. Strengthening the Application

Following the initial setback, Nasdaq and other stakeholders made updates to their ETF applications. Notably, they explicitly listed Coinbase as a surveillance-sharing agreement partner. While such listings are uncommon, Bui explained that this addition aimed to bolster the application's strength.

5. Competition in the Spot Bitcoin ETF Arena

It's worth noting that BlackRock's proposal isn't the only one of its kind. Nasdaq is concurrently handling a similar proposal from Valkyrie Investments. Moreover, other exchanges, including Cboe, are managing proposals from various asset management firms such as Ark Invest, VanEck, WisdomTree, Invesco, and Fidelity. NYSE Arca is also overseeing an ETF proposal from Bitwise. Many of these proposals share a common feature: a surveillance-sharing agreement with Coinbase.

6. Grayscale's Unique Approach

In a different approach, Grayscale is seeking to transform its existing GBTC fund into a spot Bitcoin ETF. Bui acknowledged Grayscale's proposal and its recent legal victory, indicating that Nasdaq is closely monitoring the implications for their own filings.

7. SEC's Decision Delay

In late August, the SEC postponed its decision on most of the aforementioned spot Bitcoin ETFs, with expectations for certain filings to be addressed in October. This delay reflects the regulatory scrutiny and careful evaluation these proposals are undergoing.

In conclusion, while BlackRock encountered an early rejection on its journey to launch a spot Bitcoin ETF, it's important to view this setback as a procedural hurdle rather than a reflection of the product's potential success. The cryptocurrency market remains dynamic, with several key players vying for a spot Bitcoin ETF. As the SEC continues its review, the future of these ETFs is uncertain, but the enthusiasm surrounding them remains undiminished.

Also Read: The Ultimate Guide to BlackRock's Bitcoin ETF: Working Mechanism, Benefits, and Drawbacks

FAQs

1. What is a spot Bitcoin ETF?

A spot Bitcoin ETF is an exchange-traded fund that allows investors to buy and sell Bitcoin at its current market price, rather than through futures contracts.

2. Why did the SEC reject BlackRock's filing?

The SEC rejected the filing due to procedural issues related to regulatory compliance, not because of concerns about the product's viability.

3. What is the significance of listing Coinbase as a partner?

Listing Coinbase as a partner enhances the transparency and surveillance capabilities of the ETF, which can be seen as a positive aspect by regulators.

4. How does Grayscale's proposal differ from others?

Grayscale aims to convert its existing GBTC fund into a spot Bitcoin ETF, offering a unique approach compared to other applicants.

5. When can we expect a decision from the SEC regarding these ETFs?

The SEC is anticipated to make decisions on some of the spot Bitcoin ETF filings in October, although specific dates may vary.