Background of the SEC’s Decision
On Thursday, the U.S. Securities and Exchange Commission (SEC) dropped a bombshell by rejecting the application for First Trust SkyBridge’s spot Bitcoin exchange-traded fund (ETF). This decision didn’t come out of nowhere; it followed a rollercoaster of deferments since SkyBridge first threw its hat in the ring in March 2021.
Reasons for Rejection
In its official statement, the SEC flexed its regulatory muscles, declaring that the proposed rule change by the New York Stock Exchange, Arca, was anything but foolproof when it comes to protecting investors from “fraudulent and manipulative acts.” The SEC insisted that for an ETF to be approved, it must have a solid surveillance-sharing agreement with a regulated market—something the NYSE seemed to fall short on.
Arguments from NYSE Arca
The NYSE Arca, attempting to make its case, referenced a $10 million market order as evidence that large Bitcoin transactions would barely create a ripple in the market. It even threw in Tesla’s $1.5 billion Bitcoin escapade as a prime example of how companies are slowly daring to dip their toes into the crypto waters. The NYSE argued that such activities underscore the necessity for a robust Bitcoin investment vehicle, instead of relying on “imperfect Bitcoin proxies.”
Similar Rejections in the Past
However, the SEC remained unyielding, reminding everyone of its prior decisions to reject similar Bitcoin spot ETFs from heavyweights like VanEck and WisdomTree last year. It’s almost like the SEC is the parent telling their teenager that everyone else’s ETF is not as cool as they think it is.
Looking Ahead: What’s Next?
So where does this leave us? Although the SEC has been known to rain on the Bitcoin ETF parade, the spotlight is now on a pending application from the New York Digital Investment Group (NYDIG), which is still under review. Expect a verdict by March 16. Will they get the green light, or will the SEC continue its streak of scrutiny? Only time will tell!
