SEC vs. Spot ETFs

The vast majority of people involved in the cryptocurrency industry had high hopes that the Securities and Exchange Commission (SEC) would take a more accommodating stance toward Bitcoin exchange-traded funds this year. That was the result of multiple organizations submitting applications for the same position at the beginning of the year. Included on that list were companies such as Valkyrie, VanEck, Grayscale, Teucrium, and Global X, among others.

Teucrium BTC Futures ETF is the only exchange-traded fund (ETF) that the Securities and Exchange Commission (SEC) has given its blessing to, which has dampened rising anticipation in the cryptocurrency market. Grayscale Investments revealed the SEC’s decision to reject their spot Bitcoin ETF in a tweet on Twitter not too long ago. The well-known Wall Street investor has expressed interest in converting his Grayscale Bitcoin Trust (GBTC) into a spot exchange-traded fund.

Many people believed that the possible approval of Grayscale’s request by the SEC would provide the necessary boost to the cryptocurrency markets just as the markets continued their downward spiral. The rejection spread panic throughout a market that was already vulnerable, which resulted in a drop of 5 percent for the coin. The price of bitcoin is currently fluctuating around $19,200, and the forecast for the future is still pessimistic.

At this time, it appears that these anticipations will have to be postponed for a lengthier period of time before being realized. It also represents yet another spot Bitcoin ETF in addition to Bitwise that has been rejected by the commission this year, further strengthening the commission’s position that it has held against ETFs for a long time. The most important question is why the commission has not yet approved spot ETFs, and the second most important question is how the commission plans to address the primary issue.

Grayscale was thought to have the most potential to get the SEC’s blessing, according to the projections. The commission stated, notwithstanding this, that the corporation did not fulfill the requirements of Section 6 (b) (5) of the Securities and Exchange Act of 1934. The Securities and Exchange Commission (SEC) claims that Grayscale did not live up to the requirements necessary to prevent market manipulation and fraud and to take advantage of a surveillance-sharing agreement.

The SEC has taken a stance against ETFs for a number of different reasons, including the fact that spot ETFs base their performance on Bitcoin’s price rather than an index. Because of this, it is more likely than not that the commission would allow futures ETFs, which are quite similar to CME Futures and fall under the stock exchange.

In addition, it emphasizes that the absence of clear regulatory compliance on the part of the cryptocurrency markets makes it more difficult for the commission to have faith in the legitimacy of their operations. The majority of exchanges have, up to this point, refrained from registering with the SEC, which designates them as non-national security exchanges. The Securities and Exchange Commission (SEC) might be concerned about exchanges that are located outside of their jurisdiction because these exchanges will not be subject to regulation by the agency.

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As a result, the commission is requesting that the Commodity Futures Trading Commission (CFTC), which is responsible for regulating Bitcoin as well as other commodities, identify appropriate regulations for the coin. If such is the case, then these initiatives, along with the efforts of other regulatory authorities working together, will pave the road for the introduction of spot ETFs.

The potential forecast

Grayscale has responded to the SEC’s judgment against its spot ETF by submitting a petition to appeal the decision. Despite this, other participants consider this approach to be a fruitless attempt. If there were more transparent laws around the cryptocurrency market, the Securities and Exchange Commission (SEC) might be more receptive to spot ETFs. In addition, the current climate may compel exchanges to register with the commission so that they can gain access to other doors. In spite of this, there is still a chance that things will turn out better in the future.