By Tom Blitzer
Key Insights:
- Bitwise counters SEC’s “inconclusive” stance with robust academic evidence on BTC futures’ role.
- CME’s significance in price discovery becomes pivotal for Bitwise’s ETF approval.
- SEC’s past rejections and Grayscale’s court ruling add layers to Bitwise’s challenging path.
Bitwise Asset Management has taken a proactive step. The firm has submitted a revised application for its spot Bitcoin exchange-traded fund (ETF) to the United States Securities and Exchange Commission (SEC). This move comes after the SEC raised concerns about Bitwise’s initial proposal, particularly regarding using the CME BTC futures market for surveillance sharing.
Bitwise’s Counter to SEC’s Doubts
The SEC has previously had reservations about the relationship between BTC futures and spot markets. Specifically, the regulator pointed to a “mixed” or “inconclusive” academic record. However, Bitwise’s amended application delves deep into this issue. Bitwise has concluded after examining academic works cited in 11 prior SEC disapproval orders for spot BTC exchange-traded products. Significantly, the firm asserts that the CME is the primary driver of price discovery in the Bitcoin market.
Moreover, Matt Hougan, Bitwise’s chief investment officer, took to X (previously known as Twitter) to shed more light on the matter. He emphasized that every well-constructed academic study supports the notion that the CME plays a pivotal role in the Bitcoin market. Consequently, he believes the CME can function as a “regulated market of significant size” for surveillance purposes.
Additionally, it’s worth noting that the SEC has set stringent criteria for listing exchanges. An exchange must either have a surveillance-sharing agreement with a regulated market of significant size or demonstrate other effective means to prevent fraudulent and manipulative acts. Hence, the importance of the CME’s role in Bitwise’s application cannot be overstated.
However, the road to SEC approval has its challenges. The SEC has previously rejected several similar applications, deeming them insufficient in meeting regulatory standards. Besides, the recent court decision to overturn the SEC’s rejection of Grayscale Investments’ application adds another layer of complexity. If the SEC decides to appeal the Grayscale ruling, Bitwise might find itself back at square one.
What Lies Ahead
The stakes are high for Bitwise and other financial firms vying for the green light from the SEC for their spot Bitcoin ETF applications. The SEC’s past decisions and the recent court ruling on Grayscale’s application underscore the challenges ahead.
However, Bitwise still needs to be addressed. The firm’s detailed and comprehensive response to the SEC’s concerns demonstrates its commitment to meeting regulatory requirements.