In recent weeks, the Securities and Exchange Commission (SEC) has been actively consulting with creators of Bitcoin-based ETFs. Traces of these discussions are evident in the recently submitted amendments to the applications. These changes may shed new light on how the SEC approaches cryptocurrencies, especially after years of rejecting similar proposals. Are we witnessing a new stage in the integration of cryptocurrencies with traditional financial markets?
In November, two significant entities in the cryptocurrency market – Grayscale and Blackrock – confirmed meetings with the SEC regarding their ETF applications. Subsequently, both companies submitted amendments to their applications, which may provide insight into the nature of these discussions.
The changes in the applications suggest that the SEC is taking a more attentive approach than in the past. Previously, the Commission often rejected similar proposals, citing the risk of Bitcoin market manipulation. However, it now seems that the approach to this issue is evolving.
Notably, in Blackrock’s amended application, there are references to the Fedwire settlement system and the SWIFT network, indicating increased attention to potential risks associated with financial infrastructure. Mentions of possible failures of these systems, alongside risks such as hacking attacks or problems with the Bitcoin network, represent a new element in risk analysis.
An interesting change in Blackrock’s application is also the method of potentially liquidating the fund. In the event of its dissolution, investors would receive a cash refund, not in Bitcoins, marking a significant departure from previous practices.
Additionally, Blackrock’s application now includes detailed requirements for verifying the origin of funds to be invested in Bitcoin. This is a response to growing concerns related to money laundering and other illegal activities in the cryptocurrency space.
The SEC also seems interested in ensuring that investors have access to reliable real-time Bitcoin price information. To this end, Blackrock has committed to using the CME CF Bitcoin Real Time Index, updated every 15 seconds.
Another significant ETF proposal, submitted by Bitwise, also underwent several changes. The name of the fund was changed to “Bitwise Bitcoin ETF”, and the application emphasizes various risks associated with investing in Bitcoin.
Although the SEC still has time to make a decision on these applications, these movements show that the market for a Bitcoin-based ETF may be approaching realization. Recent weeks have seen an increased influx of investments into cryptocurrency-related products, which could be a signal of growing interest and trust in this asset class.
Recent actions by the SEC and investment firms may indicate a changing approach to cryptocurrencies in financial markets. While the future of Bitcoin-based ETFs remains uncertain, the observed changes could be the harbinger of a new chapter in the history of digital currencies.
