SEC Bitcoin ETF Decision Looms as Industry Holds its Breath

The long and winding road toward SEC approval of a Bitcoin exchange-traded fund (ETF) in the U.S. may finally be nearing its end. After years of rejections and delays, the stars appear aligned for the SEC to greenlight the first spot Bitcoin ETF in the coming days. But doubts linger whether Chair Gary Gensler will give the final sign-off.

Keypoints

• SEC issued additional comments to Bitcoin ETF applicants on the same day they submitted updated documents with fee structures
• Some see quick SEC response as positive sign they are working to move things forward, while others worry it could signal delays
• Bitcoin price surged on renewed optimism about ETF approval, with some analysts putting odds as high as 95% for January
• Former SEC Chair Jay Clayton said ETF approval is “inevitable” and there’s nothing left for SEC to decide
• Not everyone convinced approval is guaranteed, with Chamber of Digital Commerce founder worried SEC Chair could still block

Hopes were raised this week after the SEC swiftly issued comments on updated filings from ETF hopefuls just hours after they were submitted. The ETF applicants provided more details on proposed fee structures in a bid to make their offerings more attractive to investors.

Really this just shows how quickly the SEC is turning these things around. Borderline unheard of to send over a document to the SEC in the morning and get comments back the same day (I think)

If they wanted to delay — the issuers wouldn’t have gotten comments back tonight

— James Seyffart (@JSeyff) January 9, 2024

While some industry experts took the SEC’s rapid response as a delay tactic, others saw it as a positive development reflecting their eagerness to push the approval process forward. “It was borderline unheard of to receive comments from the regulator on the same day,” said Bloomberg analyst James Seyffart.

The optimistic view helped propel Bitcoin prices over $47,000 on Monday, with analysts from Bloomberg Intelligence putting the odds of SEC approval this month at 95%. Further boosting hopes, former SEC Chair Jay Clayton stated approval is now “inevitable” with nothing left to debate.

Despite the momentum, doubts linger whether Chair Gensler will ultimately give his blessing. On Monday he posted several warnings on Twitter about the risks of crypto investing in what some saw as a last ditch effort to halt approval. “I’m hoping for a successful launch this week,” said Chamber of Digital Commerce founder Perianne Boring, while admitting “Chair Gensler doesn’t want to go down without a fight.”

Gensler previously stated several concerns about approving a Bitcoin ETF, ranging from risks of fraud and manipulation in crypto markets to questions around sufficient oversight. However, with futures-based Bitcoin ETFs already trading, pressure mounted through 2021 for the SEC to finally allow spot Bitcoin funds as well.

Now the SEC faces a deadline of January 10th to issue a ruling on at least one spot Bitcoin ETF application. Sources tell Axios that approval for one or more funds could come as soon as Wednesday, with trading ready to commence Thursday morning. The selected ETF issuers are likely those that can prove their ability to protect against risks Gensler outlined.

For example, firms like VanEck which just seeded its proposed fund with $72.5 million, provides confidence in its long-term viability. While Bitwise seeded $500,000 and engaged in a “fee war” with other issuers to offer the most competitive terms to attract investors.

Ultimately the final decision lies with Chair Gensler in these historic next few days for crypto. Will he finally relax his hostility toward Bitcoin ETFs? Or will doubts and delays continue even as public and industry pressure becomes overwhelming? All eyes are on the SEC now.