Bitwise Enhances Bitcoin ETF Application Amid SEC Scrutiny, but Compliance Concerns Linger
Summary:
Bitwise Asset Management has updated its application for a spot Bitcoin ETF, adding 40 additional pages of text to address objections raised by the US Securities and Exchange Commission (SEC). Despite this, the firm's senior official warns that the application still might not meet all regulatory demands. Bitwise's updated application is backing the idea that CME bitcoin futures market has a leading role in price discovery, countering previous SEC's disapproval arguments. Bitwise is one among six companies whose Bitcoin ETF applications are currently on hold.
Bitwise Asset Management has refined its application for a Bitcoin exchange-traded fund (ETF), with an additional 40 pages of text addressing the objections raised by the US Securities and Exchange Commission (SEC). However, a senior official at the company cautioned that it may still not comply with all regulatory criteria. Bitwise is one among the six companies whose Bitcoin ETF applications were put on hold by the SEC after delaying its decision. This occurred due to a legal reversal of the SEC's refusal of Grayscale Investments' proposal to transform its Grayscale Bitcoin Trust into a publicly listed ETF.
Bitwise's chief investment officer, Matt Hougan, via X (previously Twitter), elaborated that if the SEC challenges the Grayscale decision, the circumstances would revert to as they were prior. In such a scenario, he stated that they would again need to establish that the CME bitcoin futures market drives price discovery over the spot market to act as a 'significant and regulated market' for surveillance purposes.
The CME Group, located in Chicago, runs derivatives exchanges which include a Bitcoin futures and options market. Bitwise's refined application tackled the SEC's point of view of a 'mixed' or 'inconsistent' academic report regarding the correlation between Bitcoin futures and spot markets. After evaluating academic references in 11 past SEC orders of disapproval for Bitcoin ETF products, Bitwise confidently stated that the CME has a leading role in price discovery.
Moreover, Hougan summarized that the updated application displayed that all well-constructed academic studies support the conclusion that the CME is 'substantial'. This counters numerous arguments offered by the SEC in past rejections.
The observations made in Bitwise's refined application are crucial in fulfilling SEC's criteria. The SEC has ruled that a listing exchange should have a surveillance-sharing agreement with a regulated market, such as the CME bitcoin futures market, which is 'substantial in size.' This condition is enforced if an exchange cannot prove that other methods to prevent fraudulent and manipulation practices are adequate – a scenario the SEC has found to be true for previous applicants.
Hougan hinted, "Surveillance sharing agreements with spot exchanges are positive, yet might not fulfill the stringent regulatory requirements."
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Published At
9/26/2023 7:47:23 PM
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