Spot Bitcoin ETFs Likely to Get SEC’s Green Light: Bernstein Report

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A research report from brokerage firm Bernstein sheds light on the challenging position faced by the U.S. Securities and Exchange Commission (SEC) when it comes to approving spot bitcoin exchange-traded funds (ETFs). However, despite these challenges, the report suggests that the likelihood of approval for such ETFs is relatively high.

The SEC has previously granted approval for futures-based bitcoin ETFs and leverage-based futures ETFs. The approval was based on the understanding that regulated exchanges like the CME provide pricing for futures. Nevertheless, the SEC has expressed concerns regarding spot bitcoin ETFs due to the fact that spot exchanges such as Coinbase do not fall under its regulation. Moreover, spot prices are considered less reliable and more susceptible to manipulation.

Read More: SEC Slams BlackRock and Fidelity Bitcoin ETF Filings: Are The Markets in Jeopardy?

Recent Filings Lead to Market Frenzy

Although the SEC has received numerous applications, it has yet to approve a spot bitcoin ETF. Recent filings by asset managers, including Blackrock, for spot bitcoin ETFs have sparked discussions within the industry.

These filings have drawn attention to the ongoing deliberations surrounding the approval of spot bitcoin ETFs.

Key Points from Bernstein’s Report

A notable development mentioned in the report is Grayscale’s attempt to convert its Grayscale Bitcoin Trust (GBTC) into an ETF. Currently under review by an appeals court, this case has sparked skepticism about the differentiation between futures and spot prices. The analysts note the court’s response, which suggests a need for further consideration in this area.

The report also highlights suggestions from industry experts regarding a surveillance agreement between spot exchange operators and regulated exchanges such as Nasdaq. This proposal aims to address the absence of a spot bitcoin ETF. Currently, the lack of such an ETF has led to the popularity of over-the-counter products like the Grayscale Bitcoin Trust (GBTC). However, the report notes that these products are more expensive, illiquid, and inefficient.

In conclusion, the report indicates that the SEC would prefer the introduction of a regulated bitcoin ETF led by mainstream Wall Street participants, with surveillance provided by existing regulated exchanges. This approach is seen as more favorable than relying on over-the-counter products like GBTC to meet the growing institutional demand for Bitcoin investments.