Over the years, spot bitcoin ETFs have become the “holy grail” of the crypto industry.
An ETF is a publicly traded investment vehicle that tracks the value of an underlying asset; in the case of a Bitcoin ETF, that asset is Bitcoin. Proponents of a bitcoin ETF argue that the complexity of exchanges, crypto wallets and private keys still poses a huge barrier for newbies entering the crypto space, and that a bitcoin ETF would enable ordinary users to gain exposure to bitcoin without actually holding it own cryptocurrency.
Bitcoin ETFs have sprung up around the world, including Canada, Brazil, and Dubai, and in October 2021, ProShares ’ Bitcoin futures ETF was listed on the New York Stock Exchange. However, to date, the U.S. Securities and Exchange Commission ( SEC ) has rejected all applications for spot bitcoin ETFs, which offer the opportunity to invest directly in bitcoin rather than futures contracts. The SEC has repeatedly pointed out that cryptocurrency traders may engage in market manipulation.
However, under the stimulation of asset management giant BlackRock , a number of financial companies have joined the new spot ETF application competition. The following are the spot Bitcoin ETFs currently waiting for approval (public data as of June 29, 2023):
1. Ark Invest
Ark Invest, an investment firm led by Cathie Wood, submitted an application for the Ark 21Shares ETF in June 2021. ARK Invest has partnered with Swiss ETF provider 21Shares AG to launch the ARK 21Shares Bitcoin ETF; if approved, it will trade on Cboe's BZX exchange under the ticker symbol ARKB.
The firm is also the first to disclose fees for its bitcoin ETF, with documents revealing plans to pay 21Shares a fee of 0.95%, which the company will use to cover operating expenses.
Ark Invest has invested in cryptocurrency exchange Coinbase , Grayscale Bitcoin Trust and payment processor Square, which holds more than 8,000 bitcoins on its balance sheet. Cathie Wood is an ardent supporter of Bitcoin, arguing that the cryptocurrency represents "a new asset class" and could become a reserve currency.
Ark Invest's ETF was rejected in early 2022. The company then immediately reapplied and was rejected in January 2023, with Ark Invest now in the process of applying for a third time.
2. BlackRock
On June 15, BlackRock, the world's largest asset management company (over $9 trillion in assets under management as of Q1 2023), shocked TradFi and the crypto industry by submitting a Bitcoin spot ETF application. The filing proposes Coinbase as a cryptocurrency custodian and spot market data provider, and BNY Mellon as a cash custodian.
Eric Balchunas, senior ETF analyst at Bloomberg, said the investment product is technically a trust, but is functionally a “real deal” — a spot market ETF. Balchunas said that BlackRock has repeatedly fought with the US Securities and Exchange Commission (SEC) to launch ETFs, but its success ratio is 575 to 1.
BlackRock's ETF application was endorsed by former Barclays CEO Bob Diamond, which also led to new SEC applications from WisdomTree, Invesco and Valkyrie , while helping Bitcoin prices return to $30,000 in June 2023 above.
3. Bitwise
Bitwise Asset Management has filed a new application with the US SEC on June 16, requesting rule changes to accommodate its planned Bitwise Bitcoin ETP Trust.
The U.S. SEC rejected the Bitcoin spot ETF application submitted by Bitwise in June 2022, and believed that the ETF could not achieve sufficient supervision and sharing, nor could it provide protection against market manipulation and prove that the relevant market was large.
In April, Matt Hougan , Bitwise's chief investment officer, said that while a spot bitcoin ETF would be "fantastic" for investors in the long run, Bitwise may wait until there is more regulatory clarity before launching another ETF.
In the new filing, BitWise said the US SEC should have 45-90 days to approve, reject or initiate other processing around its proposed rule change. It is reported that the application was issued by the New York Stock Exchange (NYSE), but has not yet been processed by the US SEC, which means that the actual deadline for the relevant application is not yet known.
4. Invesco Galaxy Bitcoin ETF
Galaxy Digital and Invesco jointly filed a Bitcoin ETF on September 22, 2021, called the Invesco Galaxy Bitcoin ETF. Its ETF will also be "physically backed" by bitcoin, rather than through Derivatives such as futures, according to the filing. Invesco Capital Management LLC is the sponsor of the application, but it is unclear which company will host the application’s bitcoins.
The sponsor is a wholly-owned subsidiary of Invesco Ltd, which is also the fourth largest ETF provider in the US, a qualification that may help in submitting the application. "For people who have been in the ETF business for a long time, it's very similar to the early days of ETFs (late 1990s, early 2000s)," said John Hoffman, head of U.S. ETF strategy at Invesco.
The offering is the first in a series of crypto ETFs that the two companies hope to list on the U.S. market.
5. WisdomTree
New York-based asset manager WisdomTree already has experience running a bitcoin ETF ; it launched a bitcoin ETF on Switzerland's SIX exchange in 2019. In March 2021, he joined the ranks of candidates for the US Bitcoin ETF, submitted an S-1 document to the SEC, and proposed to list the WisdomTree Bitcoin Trust on the Cboe bZx exchange with the stock code BTCW.
The SEC has since stalled, first seeking public feedback on the proposal and then announcing that it needed more time to consider "the issues raised" in the comment letter.
The SEC rejected WisdomTree's application in late 2021, around the same time it rejected similar applications from Valkyrie and Kryptoin. WisdomTree filed a new application in mid-2023, shortly after BlackRock filed.
6. Valkyrie Investments
A newer player, asset manager Valkyrie submitted its first bitcoin ETF application in January 2021. The ETF, which will be referenced to the Chicago Mercantile Exchange (CME) bitcoin reference price and traded on NYSE Arca , "provides investors with an efficient means of implementing a variety of investment strategies," the company wrote in the proposal. , Xapo, the cryptocurrency custodian, is responsible for custody and cold storage of the fund’s bitcoin.
In the filing, Valkyrie alluded to the volatility of cryptocurrencies — one of the SEC’s main concerns about a bitcoin ETF. "The potential consequences of a bitcoin exchange failure could adversely affect the value of the shares," it said in its risk assessment.
Unsurprisingly, the SEC delayed ruling on Valkyrie's application, while also delaying rulings on Kryptoin, WisdomTree, and Global X 's applications, ultimately rejecting both Valkyrie and Kryptoin around Christmas 2021.
In early 2022, Valkyrie's Bitcoin mining ETF successfully received SEC approval. The vehicle is backed by holdings in companies that use an average of 77% renewable energy, including industry heavyweights such as Argo Blockchain , Bitfarms , Cleanspark, Hive Blockchain and Stronghold Digital Mining.
In June 2023, Valkyrie filed another bitcoin spot ETF application with the SEC.
7. Fidelity
Financial services giant Fidelity, which manages about $11 trillion in assets, filed the application on June 29, and the ETF is registered under the name Wise Origin Bitcoin Trust. According to the document, Fidelity Digital Asset Services will be “responsible for custody of the trust’s bitcoin.”
Unlike BlackRock, Fidelity has previously attempted to launch a spot bitcoin ETF. The company filed in 2021 for the Wise Origin Bitcoin Trust, a proposed ETF that was ultimately rejected by the SEC in January 2022. The rejection comes nearly two months after Fidelity successfully launched a spot bitcoin ETF in Canada.
Fidelity has dabbled in the crypto space for years, launching Fidelity Digital Assets in 2018 to provide cryptocurrency custody and trade execution services to institutional investors such as hedge funds, family offices and market intermediaries . And in April 2022, the Crypto Sector and Digital Payments ETF (FDIG) and the Fidelity Metaverse ETF (FMET) were launched.
failure case
There are many examples of failed applications for spot bitcoin ETFs; the SEC has rejected all such applications to date. Here are all the applications that have been rejected to date:
1. Global X
Global X Digital Assets, a fund manager with $31 billion in assets under management, filed with the SEC in July 2021. The proposed Global X Bitcoin Trust will trade on the Cboe BZX exchange.
GlobalX's portfolio spans 84 ETFs spanning disruptive technologies, equity income, commodities and emerging markets. The proposed trust did not disclose the identity of the custodian responsible for the safekeeping of the bitcoin, other than to identify it as a limited purpose trust company authorized to provide custody services for digital assets in New York state.
In September 2021, the GlobalX Bitcoin Trust is one of four Bitcoin ETF applications (including one Bitcoin futures ETF application) that the SEC has pushed back the deadline. Extended until November 21, 2021. In March 2021, the proposal was rejected by the SEC and NYDIG.
2. Kryptoin
Delaware-based Kryptoin first tried to apply for a Bitcoin ETF in October 2019, planning to list the Kryptoin Bitcoin ETF Trust on NYSE Arca. The financial services firm made a second attempt at launching a bitcoin ETF in April 2021, with a revised proposal to list the trust on Cboe's BZX exchange. Its amended filing lists service providers to assist with the launch of the ETF, including cryptocurrency exchange Gemini , which will provide custody for bitcoin held by the trust.
By the end of the month, the application was officially under review by the SEC, which subsequently postponed its decision on the application until July 27, 2021.
In September 2021, the SEC again postponed the deadline for making a decision on the Kryptoin Bitcoin ETF Trust, revising the date to December 24, 2021. At this point, the SEC’s announcement highlighted the need for more time to “consider the proposed” rule change and the issues raised in the comment letters related to it,” with the SEC rejecting Kryptoin and Valkyrie’s applications by the end of 2021.
3. Fidelity/Wise Origin
March 2021 saw a surge in applications for bitcoin ETFs, including Fidelity's Wise Origin Bitcoin Trust, which was unsurprising because just a few weeks ago its global director of macro, Jurrien Timmer, said bitcoin was relatively weak compared to Gold has "unique advantages". The application for the Wise Origin Bitcoin Trust will be with Fidelity Service Company Inc as administrator, with Fidelity Digital Assets taking custody of the bitcoin underlying the ETF.
In May 2021, Cboe Global Markets submitted a proposal to list a Fidelity Bitcoin ETF, arguing that due to increased investor participation and institutional adoption of cryptocurrencies, the SEC Concerns about market manipulation have been "substantially allayed". This "facilitates the maturation of the Bitcoin transaction ecosystem." That same month, the SEC began reviewing Fidelity's filing.
In January 2022, Fidelity's ETF was rejected.
4. First Trust/SkyBridge
In March 2021, hedge fund SkyBridge Capital submitted a Bitcoin ETF application to the SEC. The firm, run by former White House communications director Anthony Scaramucci , already operates a bitcoin fund open to accredited investors with a minimum investment of $50,000; within weeks of opening in January 2021, its sales grew to more than 3.7 One hundred million U.S. dollars.
In the same month, Scaramucci was optimistic that a Bitcoin ETF could be approved by the end of 2021, publicly stating: "I hope with Gary Gensler now entering the regulatory rules, and what I know about his background, it is possible for us to launch an ETF before the end of this year." .”
In May 2021, SkyBridge Capital's Bitcoin ETF will be listed on NYSE Arca, which filed a proposed rule change application. In July of the same year, the SEC delayed the review period for the Skybridge Bitcoin ETF, ultimately rejecting the ETF in January 2022.
5. New YorkDIG/Stone Ridge
New York Digital Investment Group and advisory firm Stone Ridge quickly seized on the opportunity presented by the SEC's leadership change, becoming the second potential ETF to file with the regulator in 2021. The application was filed on February 16, the first time Bitcoin topped $50,000.
In March 2022, the SEC rejected the applications of NYDIG and Global X.
6. One River
One River Asset Management launched a bid for a bitcoin ETF in May 2021, applying for a carbon-neutral bitcoin exchange-traded fund. As Bitcoin's energy consumption and carbon footprint come under increasing scrutiny, One River has pledged to "purchase and withdraw the carbon credits necessary to account for the estimated carbon emissions associated with Bitcoin held in trust through environmental platform Moss Earth" amount”, thereby offsetting its carbon footprint.
In order to win the support of the US Securities and Exchange Commission, One River pulled out a blockbuster bomb, hired the former chairman of the US Securities and Exchange Commission Jay Clayton as an advisor. In May 2022, his application was rejected.
7. Galaxy Digital
In April 2021, cryptocurrency investment firm Galaxy Digital applied for a Bitcoin ETF; at that time, the eighth such application had been submitted to the SEC. The proposed Galaxy Bitcoin ETF will be listed on NYSE Arca. Galaxy Digital manages more than $2.5 billion in assets and is one of the largest institutional holders of bitcoin, with 16,400 bitcoins in its inventory (worth nearly $500 million at current prices).
Billionaire Galaxy Digital founder Mike Novogratz expressed his views on the SEC's reluctance to approve a Bitcoin ETF at the Ethereal Summit 2021. He believes that under the leadership of the Trump administration, the SEC will instead allow the Grayscale Bitcoin Trust ( GBTC ) flourishes, which is "not so great" for consumers. Novogratz believes that GBTC allows consumers to "purchase Bitcoin at a premium of 20-30% and be arbitraged by hedge funds into closed-end funds. ETF will be a more elegant solution."
As with every other ETF proposal, nothing came of Galaxy Digital's separate application, but then, in September 2021, the company filed for a joint ETF with Invesco, and as noted above, following BlackRock's filing, They jointly submitted a new application.
8. Grayscale
Cryptocurrency investment fund manager Grayscale's GBTC Bitcoin Trust manages more than 600,000 BTC(worth nearly $20 billion at today's prices), and in October 2021 it began formally submitting applications to convert to a spot ETF.
If its application is successful, Grayscale will be able to charge lower management fees and it will be easier to get money in and out. Grayscale first submitted an application to launch a bitcoin ETF in 2016, but withdrew its application a year later, saying, “We do not believe the regulatory environment for digital assets has evolved to the point where such a product can be successfully brought to market.”
The lack of an established bitcoin ETF has created problems for Grayscale, as well as the broader bitcoin market. GBTC replaces such products and meets most of the US institutional demand for Bitcoin. However, its shares sometimes trade at a negative premium, below the value of the underlying bitcoin per share, but the fund does not allow shares to be redeemed for bitcoin itself, so the market is unable to resolve this organically. If the bitcoin ETF is approved, investors will be able to redeem shares at any time. This may prevent negative premiums and help keep shares matching the value of the underlying token.
Grayscale has been laying the groundwork for a bitcoin ETF for some time, hiring ETF experts and signing an agreement with BNY Mellon, a global investment firm, to be a service provider for GBTC. If converting it to an ETF, BNY Mellon will provide transfer agent and ETF services.
In June 2022, the SEC rejected Grayscale's application, saying the company had not done enough to prevent potential fraud. Grayscale then immediately filed a lawsuit with the regulator, saying its reasons for the rejection were "illogical."
9. VanEck
VanEck was one of the first Bitcoin ETF applicants. Back in 2018, it made its first attempt to launch a Bitcoin ETF in partnership with SolidX - the VanEck SolidX Bitcoin Trust.
While that application was withdrawn in September 2019, VanEck tried again to launch a Bitcoin ETF, filing with the SEC in December 2020 for the VanEck Bitcoin Trust, whose shares would trade on Cboe BZX.
Notably, VanEck filed its second application just days after the departure of former SEC Chairman Jay Clayton. In a 2019 interview with CNBC, Clayton dismissed the prospect of a bitcoin ETF, noting that despite "progress" in concerns surrounding custody, cryptocurrencies remain vulnerable to price manipulation and that overseas exchanges "don't offer the same benefits as a bitcoin ETF." The same level of protection for U.S. equities.”
The SEC repeatedly delayed a decision on VanEck's second Bitcoin ETF application, which was rejected in November 2021. The company then filed a third filing in mid-2022, but the SEC stalled again and ultimately rejected it in March 2023.
a long and winding road
The road to a Bitcoin ETF has been long. The U.S. Securities and Exchange Commission (SEC) has stalled on the idea since 2013, when the Winklevoss brothers first filed for a bitcoin ETF-like trust. It has repeatedly delayed decisions on several bitcoin ETFs over the past few years, leading firms such as VanEck to withdraw applications out of fear that the SEC would reject them.
The SEC's main concerns about approving a Bitcoin ETF relate to lack of transparency in trading information, market manipulation, and properties of Bitcoin that differ from other financial assets (such as what would happen in the event of a Hard fork), and it is also concerned about the lack of Liquidity in the market.
In an interview with Decrypt, Sui Chung, CEO of cryptocurrency index provider CF Benchmarks, pointed out that early companies applying for bitcoin ETFs, such as the Winklevoss brothers, were all from startups, albeit well-funded startups. But now, those applications come from a new generation of applicants who are ready to take on these challenges.
“I think many of the areas where the SEC has expressed concern before, filers don’t have a lot of experience in the ETF market, especially in terms of the vagaries of the crypto market and how they sync up with the stock market through the ETF structure,” said Sui Chung. He added that if structured in the right way, a Bitcoin ETF is no different from any other ETF listed on a stock exchange.
In August 2021, SEC Chairman Gary Gensler stated in the hearing that he "especially looks forward" to the SEC's review of "Bitcoin futures ETFs limited to trading on CME", suggesting that the SEC is more inclined to Bitcoin futures ETFs. ETFs that physically hold bitcoin have sparked a wave of applications for bitcoin futures ETFs, with companies such as Galaxy Digital and VanEck filing applications.
Gensler reiterated his interest in bitcoin futures ETFs in a September 2021 speech prepared for the Financial Times ' "The Future of Asset Management in North America" conference. Earlier this year, “some open-end mutual funds launched investing in bitcoin futures traded on the Chicago Mercantile Exchange (CME),” Gensler said.
The SEC chairman noted that regulators have received numerous filings for bitcoin futures ETFs under the Investment Company Act of 1940, known as the “40 Act.” "Combined with other federal securities laws, Section 40 provides important investor protections for mutual funds and ETFs," Gensler said, adding, "I look forward to staff reviewing such filings."
In October 2021, the long wait finally came to an end when the first Bitcoin futures ETF was listed on the New York Stock Exchange. The ProShares BTC Futures ETF shattered nearly all trading records for a debut ETF, with nearly $1 billion in trading volume on its first day.
Global Bitcoin ETF
While the United States has been slow to move, other countries are forging ahead. There are now multiple Bitcoin ETFs operating in countries such as Canada and Brazil. There are a number of exchange-traded notes (ETNs) in Europe, which are very similar financial instruments.
Despite multiple rejections and delays, the crypto industry remains optimistic, with BlackRock's June 2023 filing rekindling hope. After BlackRock submitted its application, Eric Balchunas, a senior ETF analyst at Bloomberg, said that BlackRock's move "definitely injects new energy and new optimism into the entire Bitcoin ETF race."
Author: BitpushNews Mary Liu
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