On Friday, June 30, inside sources informed the media that the U.S. Securities and Exchange Commission (SEC) has returned spot Bitcoin exchange-traded fund (ETF) applications submitted by major asset management companies via the exchanges. The reason cited was a lack of clarity, completeness, and precision in the submitted materials.
This negative news caused a short-term 6% plunge in Bitcoin's value, momentarily breaking the psychological support level of $30,000. The price rebounded back above this mark after reports revealed that the SEC said asset management companies could alter the wording of their applications and resubmit.
The SEC reportedly communicated its concerns to NASDAQ and the CBOE Chicago Board Options Exchange, which submitted Bitcoin ETF applications on behalf of BlackRock and Fidelity Investments. Both exchanges agreed to address the issues raised by the regulatory body and resubmit the applications.
The SEC claimed that these asset management giants' spot Bitcoin ETF applications did not provide enough detail about "surveillance-sharing agreements" and did not list which spot Bitcoin exchanges would be required to fulfill this agreement.
Since 2017, the SEC has rejected more than a dozen ETF applications that proposed holding Bitcoin directly as the underlying asset. The reasons cited were their susceptibility to fraud and market manipulation, which is not in line with the standards of protecting investors and public interest. However, at least six ETFs that hold Bitcoin futures as the underlying asset have been approved by the SEC.
In a bid to address the regulators' concerns, the world's largest asset management firm, BlackRock, and ETF giant Fidelity Investments reportedly included a "surveillance-sharing agreement" designed to prevent manipulation in their recent spot Bitcoin ETF application documents.
In the aftermath of the largest asset management firm, BlackRock, submitting a spot Bitcoin ETF application on June 15, many traditional and crypto asset management companies have revised their similar ETF documents or resubmitted applications. These include Fidelity Investments, Ark Invest headed by Cathie Wood, Invesco, WisdomTree, Bitwise Asset Management, and Valkyrie.
The latest report from Friday stated that the SEC has not completely ruled out the possibility of approving a spot Bitcoin ETF. The requirement to resubmit applications might delay the competition among asset management firms to launch the first such ETF in the United States by at least a week.
According to the regulations, once the exchanges or asset management firms resubmit applications, the SEC has 15 days to publicize the application documents and seek public opinion. During this period, the SEC can return the application before the seventh day. After the 15-day public review period ends, the SEC will approve or reject the application within a maximum of 240 days.
Some analysts noted that because the SEC rejected Grayscale Investments' proposal to convert the world's largest Bitcoin investment trust fund into an ETF, the company sued the SEC in June last year, with a ruling expected as early as this fall. Traditional asset management giants like BlackRock and Fidelity are submitting similar ETF applications in hopes of accelerating the ETF approval process in light of a potential positive court ruling.
Observers also stated that Binance, the world's largest cryptocurrency exchange in terms of trading volume, is damaging the chances of a spot Bitcoin ETF getting approved due to its dominance in both spot and futures trading markets. Binance does not meet the SEC's standards for a regulated trading venue that satisfies significant requirements.
Coinbase, the first publicly traded cryptocurrency exchange in the U.S., could potentially benefit from the result of the spot Bitcoin ETF application. BlackRock listed the company as the custodian of the underlying asset Bitcoin for the ETF and will use the CME CF Bitcoin Reference Rate, for which Coinbase is a major provider of key information. It is expected that Coinbase will likely be BlackRock's "surveillance-sharing platform."
After being endorsed by mainstream asset management institutions, Bitcoin's price has been on an upward trend since June 15, starting from $25,600. Over the past week and a half, it has largely remained above the $30,000 mark and even surpassed $31,000 on June 23 for the first time since June 2022, hitting a new high for the year. Despite an increase of more than 85% so far this year, it is still well below the all-time high of $69,000 set in 2021.
