A Bitcoin exchange-traded fund (ETF) has long been hailed as the Holy Grail for widespread Bitcoin adoption.
Since a Bitcoin ETF would mimic the price of BTC, it allows investors to buy into the crypto market without having to jump through the complicated hoops associated with buying Bitcoin.
They can enter the market through traditional investment rails without the steep learning curve, concerns over storing their private keys, or opening an account on an exchange.
ETFs are far more widely understood as an investment vehicle than cryptocurrencies.
This means, in theory, that a Bitcoin ETF would allow for easy onboarding of traditional investors looking to get into BTC without needing to learn about the complexities of digital assets.
A Bitcoin ETF, therefore, would be very bullish for Bitcoin.
Yet, despite being “closer than we’ve ever been” to getting the go-ahead last month, the United States Securities and Exchange Commission (SEC) has rejected every Bitcoin ETF proposal to date.
The Bitwise ETF is under review again
However, it seems that the SEC is now taking another look at the recently rejected Bitwise ETF. In a statement released yesterday, the SEC said that it would be reviewing the Bitwise Asset Management and NYSE Arca filing once again. But why?
As analyst and crypto-asset specialist at eToro Simon Peters pointed out: “Bitwise didn’t request the review, so it’s an interesting move by the SEC.”
He went on to say: “Perhaps regulators in the US realise that if they don’t approve a crypto-asset ETF, then another jurisdiction might beat them to it and get an advantage in the marketplace.”
Just last month, the US regulatory body claimed that the Bitwise ETF did not meet the necessary requirements to receive the green light.
Specifically, their concerns centred on potential market manipulation and illicit activities. The SEC claimed at the time that:
“NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and, in particular, the requirement that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices.”
Market manipulation and fraud are stumbling blocks
As the SEC has pointed out on numerous occasions, it still has some major reservations about market manipulation involving Bitcoin. The Bitwise ETF was rejected on the grounds that it failed to provide enough evidence that Bitcoin is sufficiently resistant to manipulation.
Yet, the SEC is now reopening the proposal. This means that more parties can file statements of support (or opposition) until December 18.
Is this bullish for Bitcoin? Does this mean that the SEC will be approving the Bitwise ETF after all?
Not so fast. The order to reject the filing will remain in effect while the Commission continues its review.
Industry insiders remain sceptical over the move, although it certainly shows that the SEC isn’t all about closed doors when it comes to this emerging space. As Peters indicated, perhaps US regulators are finally starting to realise they’re lagging behind in the race:
“Switzerland is positioning itself as crypto-friendly, one of the reasons the Libra Association is based in Geneva. And of course China under President Xi Jinping is embracing crypto-assets and blockchain, so the Americans won’t want to be beaten to the punch by Beijing.”
Whether the Bitwise ETF proposal is finally approved this time around remains to be seen.
“It really depends on how the SEC now feels about price manipulation in the crypto markets,” Peters concluded – and what’s changed the Commission’s mind in the last few weeks.