The SEC have rejected a number of bitcoin ETF proposals in recent months, with a few more applications pending a decision. According to the founder of Abra, Bill Barhydt, the bitcoin ETF applications so far “don’t fit the mold” of companies/firms the SEC is used to engaging with.
In a recent interview with CNBC Barhydt has stated that he believes that a bitcoin ETF will be approved within a year, and the only barrier is that the applicant(s) meet the standards expected by the commission.
Will the SEC approve a bitcoin ETF?
The main date on the calendar is 30th September. This is the date the SEC will make a decision on the highly anticipated application submitted by VanEck. The decision will either be to accept, decline or delay the bitcoin ETF proposal after they previously delayed the application in the prior months.
Barhydt has stated that no ETF will be approved until an applicant meets the SEC’s specifications in terms of financial industry profile and personality archetype.
“I think the issue with the SEC, quite frankly, is that the people who are doing the applications don’t fit mold of who the SEC is used to approving. I used to work for Goldman Sachs, but if you look at how I’m dressed you probably wouldn’t know it. So I probably, unfortunately, couldn’t go like I am here to a meeting at the SEC to say I’m applying for the ability to issue an ETF.”
There have already been a number of bitcoin ETF application declined by the SEC.
On August 23rd, 2018 the SEC disapproved 9 bitcoin ETF applications’ from three different companies. The 9 bitcoin ETF proposals were made up of; 5 from Direxion, 2 from ProShares and 2 from GraniteShares. All of the proposals were ‘derivative based’ and not back by physical bitcoins’. For each of the three disapprovals’ the SEC issued the same response:
“[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
The SEC has reinforced that all the proposals submitted so far have failed to demonstrate a “resistance to price manipulation” in a BTC derivatives market lacking in volume. The SEC has stated that:
“Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.”
Barhydt believes for the SEC to approve a bitcoin ETF, the applicant needs to “look, smell and feel” right and he believes that an application will be accepted within the next year.
“It’s going to happen in the next year, I would actually make a bet on it,” he said. “There is too much demand for it.”
ETF Decisions | Upcoming Dates
The following are the dates of the remaining bitcoin ETF proposals.
Sep 7: Bitwise ETF First to Be Denied or Delayed
Sep 21: Direxion ETF Final to Be Approved or Denied
Sep 30: CBOE VanEck/ SolidX ETF 2nd to Be Approved, Denied or Delayed
The most anticipated decision is the one from CBOE VanEck/ SolidX, this was originally meant to be decided around a month ago. However, the SEC decided to delay their decision to late September. This caused the markets to drop further, however, they have stabilised since. The general feeling is that the decision will not be accepted, or at best be denied.
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