The Securities and Exchange Commission (SEC) has once more turned down applications for a Bitcoin spot exchange-traded fund (ETF) to be issued in the United States.
The latest proposal for a spot Bitcoin ETF had been submitted by 21Shares, the global crypto ETF provider, and ARK Invest of Cathie Wood.
The ETF
The two companies had joined hands together for launching the ARK 21Shares Bitcoin ETF for the second time.
The application for the Bitcoin spot ETF had been filed on May 13th last year initially. This was a month after Ark’s application had already been rejected for getting the product listed on BZX.
The ETF is essentially a financial product that offers investors exposure to the underlying asset indirectly. This can come in handy for people who want to invest in items that are often difficult to store or own on their own.
Some examples of these assets include gold and now cryptocurrency has also been added to the mix. The rationale behind the SEC’s decision to turn down the application remains the same as the last time.
The agency said that Ark had not been able to demonstrate that the investing public can be offered adequate protection by the rules of its exchange against manipulative and fraudulent practices and acts.
The rejection
According to the SEC, the Exchange Act Section 6(b)(5) outlines the obligations that an exchange has to meet before listing a bitcoin-based ETP.
The obligations that are outlined under the said Act are aimed at ensuring that investors are adequately protected from risks associated with the asset, which are quite high in the case of crypto.
If an ETF is approved, it would mean that institutions would be able to purchase bitcoin, something they are unable to do so right now because of the internal charter.
Therefore, crypto bulls are very eager to have such a product launched in the market, but the regulatory bodies are not so keen on it.
Other ETFs
In comparison, the SEC had willingly granted permission for the launch of a number of futures Bitcoin ETFs that had been rolled out in October 2021.
The first one to hit the market was the ProShares Bitcoin Strategy ETF and it saw one of the most active opening days in the history of the New York Stock Exchange (NYSE).
The difference between spot and futures ETFs is that the latter have Bitcoin futures contracts backing them, which is essentially a promise of buying bitcoin at a future date.
The Bitcoin futures market, unlike the Bitcoin spot market, is thoroughly regulated where it is possible for an ETF to have a surveillance sharing agreement like the CME Bitcoin futures market.
Grayscale had also filed for Bitcoin spot ETF and had said that it could also strike an agreement for surveillance sharing with the same market.
But, the SEC said that CME Bitcoin futures and spot Bitcoin are not adequately related and rejected its application.
This has prompted Grayscale to file a lawsuit against the SEC.