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Spot Bitcoin ETF Applications Re-Filed After SEC Notes Deficiencies
Practical Law Legal Update w-039-9848 (Approx. 5 pages)
Spot Bitcoin ETF Applications Re-Filed After SEC Notes Deficiencies
by Practical Law Finance
| Published on 05 Jul 2023 • USA (National/Federal) |
A recent wave of spot bitcoin exchange-traded fund (ETF) applications has been re-filed with the SEC in an effort to address deficiencies in prior filings reportedly pointed out by the SEC, particularly with respect to disclosure regarding surveillance-sharing agreements.
A recent wave of spot bitcoin exchange-traded fund (ETF) applications has been re-filed with the SEC in an effort to address deficiencies in prior filings reportedly pointed out by the SEC, particularly with respect to disclosure regarding surveillance-sharing agreements to help detect fraud in the underlying bitcoin markets. The following spot bitcoin ETF rule change applications originally filed from June 15, 2023 to June 23, 2023 have been re-filed with the SEC:
- Bitwise. On June 28, 2023, NYSE Arca, Inc (NYSE Arca) re-filed a proposed rule change with the SEC to list and trade shares of the Bitwise Bitcoin ETP Trust (Bitwise). On June 16, 2023, the NYSE Arca had filed a proposed rule change with the SEC to list and trade shares of Bitwise. The shares of the trust will be registered with the SEC under a registration statement on Form S-1. This is the second attempt of Bitwise to obtain SEC approval. On June 29, 2022, the SEC issued an order disapproving a prior proposed rule change to list and trade shares of the Bitwise Bitcoin ETP Trust on NYSE Arca.
- Wise Origin (Fidelity). On June 30, 2023, Cboe BZX Exchange, Inc. (BZX) re-filed a proposed rule change with the SEC to launch Wise Origin Bitcoin Trust ETF (Wise Origin), sponsored by FD Funds Management LLC, an affiliate of asset manager Fidelity Investments. The re-filed rule change specifies that BZX will enter into a surveillance-sharing agreement with major crypto trading platform Coinbase, Inc. (Coinbase). On June 23, 2023, BZX had filed a proposed rule change with the SEC to list and trade shares of the Wise Origin Bitcoin Trust ETF. The shares of the trust will be registered with the SEC under a registration statement on Form S-1. This is the second attempt of Fidelity to obtain SEC approval for Wise Origin. On January 27, 2022, the SEC issued an order disapproving a prior proposed rule change to list and trade shares of the Wise Origin Bitcoin Trust on BZX.
- WisdomTree. On June 30, 2023, BZX re-filed a proposed rule change with the SEC to launch WisdomTree Bitcoin Trust (WisdomTree). The re-filed rule change specifies that BZX will enter into a surveillance-sharing agreement with Coinbase. On June 23, 2023, BZX had filed a proposed rule change with the SEC to list and trade shares of the WisdomTree Bitcoin Trust ETF. The shares of the trust will be registered with the SEC under a registration statement on Form S-1. This is the second attempt of WisdomTree to obtain SEC approval. On October 11, 2022, the SEC issued an order disapproving a prior proposed rule change to list and trade shares of the WisdomTree Bitcoin Trust on BZX.
- VanEck. On June 30, 2023, BZX re-filed a proposed rule change with the SEC to launch VanEck Bitcoin Trust (VanEck). The re-filed rule change specifies that BZX will enter into a surveillance-sharing agreement with Coinbase. On June 22, 2023, BZX had filed a proposed rule change with the SEC to list and trade shares of VanEck. The shares of the trust will be registered with the SEC under a registration statement on Form S-1. This is the third attempt of VanEck to obtain SEC approval. On March 10, 2023, the SEC issued its second order disapproving a second proposed rule change to list and trade shares of VanEck on BZX.
- Invesco Galaxy. On June 30, 2023, BZX re-filed a proposed rule change with the SEC to launch Invesco Galaxy Bitcoin ETF. The re-filed rule change specifies that BZX will enter into a surveillance-sharing agreement with Coinbase. On June 20, 2023, BZX had filed a proposed rule change with the SEC to list and trade shares of the Invesco Galaxy Bitcoin ETF (Invesco Galaxy). The shares of the trust will be registered with the SEC under a registration statement on Form S-1.
- iShares (BlackRock). On July 3, 2023, Nasdaq Stock Market LLC (Nasdaq) re-filed a proposed rule change with the SEC to launch iShares Bitcoin Trust (iShares), sponsored by BlackRock, Inc., the world's biggest asset manager. The re-filed rule change specifies that Nasdaq intends to enter into a surveillance-sharing agreement with Coinbase. Nasdaq expects to receive market data for orders and trades from Coinbase, which it will use in surveillance of the trading of iShares. On June 15, 2023, Nasdaq had filed a proposed rule change with the SEC to list and trade the shares of iShares Bitcoin Trust (iShares). The shares of the trust will be registered with the SEC under a registration statement on Form S-1.
- Valkyrie. On July 3, 2023, Nasdaq re-filed a proposed rule change with the SEC to launch Valkyrie Bitcoin Fund (Valkyrie). The re-filed rule change specifies that Nasdaq intends to enter into a surveillance-sharing agreement with Coinbase. On June 21, 2023 Valkyrie Digital Assets had filed a registration statement on Form S-1 with the SEC to list and trade shares of Valkyrie on Nasdaq. This is the second attempt of Valkyrie to obtain SEC approval. On December 22, 2021, the SEC issued an order disapproving a prior proposed rule change to list and trade shares of Valkyrie on Nasdaq.
According to Reuters, the SEC notified BZX that its original Wise Origin rule-change filing was unclear and incomplete and that a key issue for the SEC was that BZX and the other exchanges did not name the crypto-trading platforms with which they planned to enter into surveillance-sharing agreements to help detect fraud in the underlying bitcoin markets.
If approved by the SEC, spot bitcoin ETFs would provide investors with exposure to cryptocurrency, even as that asset class comes under intense SEC regulatory scrutiny (see Practice Note, SEC Regulation of Digital Assets). Spot bitcoin ETFs are publicly traded investment vehicles that directly track the price of bitcoin.
The SEC has rejected dozens of spot bitcoin ETF applications in recent years, noting that the filings did not meet the standards designed to prevent fraudulent and manipulative practices and protect investors and the public interest. To date, only bitcoin ETFs based on bitcoin futures have been allowed to come to market by the SEC. There are currently three BTC futures ETFs operating, with ProShares Bitcoin Strategy ETF the first to launch in October 2021. Bitcoin appears to have been invigorated by the prospect of an ETF that would offer investors exposure to spot BTC on a regulated US stock exchange without the custody headache.
For more information on these and other bitcoin ETFs, see Practical Law's Bitcoin ETF Tracker.
For details on crypto regulation in the US, see Cryptocurrency and Virtual Currency Regulatory Tracker.