The fight to launch a
Bitcoin
exchange-traded fund has gone in fits and starts, but its approval may be inevitable. That would be a shot in the arm for the token market.
Even as it has rejected every application so far, the Securities and Exchange Commission will ultimately sanction a Bitcoin ETF to preserve its own interests, wrote TD Cowen policy analyst Jaret Seiberg in a research note on Monday.
“We believe approval may be getting closer as industry addresses the SEC’s concerns and the SEC looks to cement its authority over crypto,” Seiberg wrote.
The SEC declined to comment.
A spot Bitcoin ETF would be a boon for the token market. For one, financial advisors would have a means of holding Bitcoin through a traditional finance firm with which they already have comfort, as opposed to having to navigate opening separate accounts with a crypto brokerage. An ETF could also signal to institutional investors that Bitcoin will be around for decades, making it more likely that they make an allocation to it.
In recent weeks, the SEC has received a fresh round of applications for such a product.
BlackRock
(ticker: BLK) in mid-June applied to launch a fund. The application said Nasdaq and a crypto-trading platform—later identified as
Coinbase
(COIN)—had struck a surveillance agreement, directly addressing one of the SEC’s main reasons for rejecting prior efforts. BlackRock’s foray was soon followed by
Invesco
(IVZ),
WisdomTree
(WT), Fidelity, and other firms, many of which had applied before and been rejected.
Bitcoin soared after BlackRock’s application. Investors think the firm has an especially good shot at approval, given that it has only had an ETF rejected once in 576 applications.
Now, the SEC may approve the launch of a Bitcoin ETF in part for political reasons, Seiberg wrote. SEC Chair Gary Gensler may be eager to approve a product to show Congress that he’s not against digital assets per se but has real investor protection concerns about many crypto firms’ practices. Bringing ETFs to market would also make it more difficult for Congress to later take away Gensler’s authority over the industry, Seiberg said.
“Gensler may want to cement his authority over what could be a robust Bitcoin ETF sector,” Seiberg said.
It could take months for an ETF to get approved. One of the earliest deadlines for the SEC to respond to the recent round of applications is in August, but that can be extended by the agency to December. Some of the applications, including the one by BlackRock, don’t require a final response until next March.
Separately, the agency in court is fighting an effort by the
Grayscale Bitcoin Trust
(GBTC) to convert to an ETF, and a decision in that case is expected by this fall. However, even if Grayscale wins, the agency could reject the application on other grounds.
But whether it takes weeks or months, some analysts say the approval of a spot Bitcoin ETF is starting to look assured.
Write to Joe Light at joe.light@barrons.com
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