Regulatory Setback: SEC Dismisses BlackRock and Fidelity Bitcoin ETF Proposals as Inadequate

For the last two weeks, the crypto industry — including numerous experts — speculated whether the US Securities and Exchange Commission (SEC) would finally approve a Bitcoin ETF. However, after an entire wave of applications, the regulator responded, calling them “inadequate.”

The response emerged in WSJ earlier today in a report that cited people familiar with the matter.

They claimed that the regulator considers the applications unclear and incomprehensive. This was not the outcome many had expected, given that the companies worked to improve on all the issues the regulator pointed out before.

Furthermore, the revelation was quite striking, as one of the applications came from BlackRock, the world’s largest asset manager itself.

The SEC says the ETF applications lack clarity

The unnamed source that shared the SEC’s insight believes that the BTC ETF applicants were not specific enough regarding the surveillance-sharing agreement.

The agreement’s purpose is to deter fraud and manipulation and to ensure that the fund issuer is adequately monitoring the trading activities in the market, as well as customer identities and clearing activities.

After reviewing the applications, the regulator decided that all applications were lacking in this regard.

The crypto industry’s disappointment with the response is clear in Bitcoin’s price action. After previously sitting slightly above $31k, the price crashed all the way down to the support at $30k following the announcement.

The disappointment is understandable, given that BlackRock’s entry into the ETF race caused Bitcoin’s price to go on a 2-week surge. When several other major fund managers followed, the investors were certain that at least one of the big players would approve their ETF proposal.

Bitcoin ETF would protect investors, Fidelity claims

Fidelity itself submitted its application yesterday, and similar proposals came from Invesco, Valkyrie, Wisdom Tree, and Bitwise. Since there is not a single spot Bitcoin ETF in the US due to the SEC’s reluctance to approve one, investors were sure that the SEC would finally change its stance, believing that these major fund managers know what they are doing.

However, the regulator seems to be holding to its old reasons, claiming that the price of Bitcoin is open to manipulation.

Despite this, investors want access to a Bitcoin ETF, as it would allow them to profit from BTC price action without holding and managing the asset. This is primarily a concern among institutional investors, who prefer to work with assets in a familiar way.

Fidelity even argued in its application that a Bitcoin ETF would allow investors to avoid risk. However, despite the SEC’s claims that it wants to protect investors, its refusal to approve an ETF indicates that this is not the real reason behind the decision.

The regulator still seems to be focused on disrupting the advancement of the crypto industry in the US in any way possible.

On the plus side, the regulator did approve the first leveraged Bitcoin futures ETF last week.

The new product was opened to investors this Tuesday on the Chicago Board Options Exchange (CBOE).

Related

• The SEC and Their Showdown with Crypto
• Coinbase Says SEC Has No Jurisdiction Over Its Assets
• Pressure Builds On The SEC As Fidelity Digital Joins The Spot Bitcoin ETF Race

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