Does bitcoin need a spot bitcoin ETF? Probably not. The United States, however, might need one or two. Other countries have full proof of concepts that are already working and absorbing capital. None of these products have any of the problems that the SEC thinks a bitcoin spot ETF would bring. Moreover, there are already future Bitcoin ETFs operating smoothly in the United States. What’s the backlog with the spot bitcoin ETF really?
Several companies are constantly applying to be the first to offer the now legendary bitcoin spot ETF. The SEC continues to reject their proposals left and right. Is there a reason behind all this? The Chamber of Digital Commerce explained it and went for President Gensler’s throatt, and this is the first thing covered by Bitcoinist. Their report, however, contained more useful information. A series of reasons why the SEC must approve a spot bitcoin ETF before it’s too late.
The US Needs a Bitcoin Spot ETF
In “The Crypto Riddle: Why Doesn’t the SEC Approve a Bitcoin ETF?“, the Chamber of Digital Commerce highlights several points that are difficult to deny. However, the document also reads as a plea, then as a threat. It’s a bizarre report, but that doesn’t mean the points in it don’t make sense.
- “The SEC cannot deny the significant market demand for bitcoin (including, and in particular, at the institutional level), but an investor seeking to invest directly in bitcoin (in the absence of a Bitcoin ETF) should do without the umbrella of federal securities regulatory protection that has developed over the past 80 years.
This directly contradicts Chairman Gensler’s argument that the SEC does not approve a spot bitcoin ETF to protect the uninformed public. However, what the Digital Chamber of Commerce does not tell you is that self-custody of your bitcoin is easy if you accept responsibility for it. Bitcoin represents the first time retail investors have had access to ownership rights.
- “The SEC’s formal justifications for denying the applications remain the same as those offered in its first denials, despite significant market maturation and institutionalization, proofs of concept offered by similar products operating overseas, and robust research and rigorous undertakings by market participants showing the concerns expressed by the SEC are unfounded.
The Winklevoss twins first applied for a spot Bitcoin ETF in 2013. Since then, several institutions with endless tradition, staff, and budget have tried and failed. According to the Chamber of Digital Commerce, if institutions perceive that their apps will fail no matter what they do, they will stop trying. And that will stifle innovation.
BTC price chart for 09/15/2022 on FX | Source: BTC/USD on TradingView.com
Bitcoin Price Discovery and the CME
According to the Chamber, “the SEC has imposed an unprecedented requirement unique to bitcoin on the industry, which requires a claimant to prove that bitcoin price discovery occurs on the CME.” The organization said this is what it would need to approve a spot Bitcoin ETF. Something they wouldn’t ask of more traditional products. Well, it turns out…
- “Two of the industry’s most sophisticated participants have designed and implemented research programs that have shown that bitcoin price discovery does in fact occur on the CME on a statistically significant basis. The SEC standard was met – and yet the SEC continued to issue denials.
That’s not all, as “the SEC showed a significant inconsistency in its analysis of whether the CME bitcoin price discovery is statistically significant.” However, the organization still “approved multiple Bitcoin Futures ETFs for listing and trading in October 2021,” and all of them are under the CME.
The Bitcoin ecosystem has changed
The SEC knows it. The bitcoin network has evolved, and so have the institutions around it.
- “Many highly regulated entities operate in the bitcoin ecosystem with systems in place to protect customer assets and prevent the kind of fraud and vulnerability that plagued the bitcoin market in its early days. By allowing investors to gain exposure to bitcoin through the purchase of a Bitcoin ETF, investors can outsource these due diligence requirements to the Bitcoin ETF issuer itself, experts in the field .
Thus, the Chamber is throwing bitcoin users under the bus for what they perceive to be a higher purpose. Perhaps the United States needs a spot bitcoin ETF, and many users will benefit from the product and convenience of paper bitcoin. However, these users could just as easily do their due diligence, learn how to hold the asset bitcoin themselves, and call it a day.
- “The SEC will now begin defending its denial of the Grayscale application in court. For months prior to the SEC’s decision on the Grayscale application, Grayscale publicly argued that it believed a denial of its application would be a violation of the APA and the Exchange Act and asserted that he would be prepared to pursue legal action if such a denial were issued.”
Shades of grey sued the SEC, and the Chamber suggests a similar approach. “Unfortunately, it is becoming increasingly likely that it will take litigation or targeted congressional efforts to break the SEC’s increasingly arbitrary and unwarranted treatment of this important investment product,” their report concludes. end.
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