In a significant development for the crypto industry, a U.S. federal court has ordered the Securities and Exchange Commission (SEC) to reverse its decision to reject Grayscale Investments’ application to convert its Bitcoin Trust product into an exchange-traded fund (ETF).
The ruling has been welcomed by industry experts, with Matt Hougan, CEO of Bitwise Asset Management, stating that it brings the crypto industry “one big step closer” to gaining approval for a spot bitcoin ETF.
Bitcoin (BTCUSD) has experienced a notable surge in response, rallying over 7% in the past 24 hours to reach a high of $28,127 on Tuesday, according to CoinDesk data. While the cryptocurrency has seen a year-to-date increase of over 57%, it still remains nearly 60% below its all-time high in 2021.
In her opinion, D.C. Circuit Court of Appeals Judge Neomi Rao criticized the SEC’s decision to approve two bitcoin futures funds while denying applications for a bitcoin spot ETF as “arbitrary and capricious,” and in violation of federal administrative law.
If the SEC chooses not to appeal the court’s decision, it is anticipated that not only Grayscale’s spot bitcoin ETF application but also many of the other nine applications pending before the SEC will be swiftly approved. Ric Edelman, Founder of the Digital Assets Council of Financial Professionals, expressed this sentiment.
This ruling marks a significant turning point in the journey towards establishing a bitcoin ETF and paves the way for further regulatory progress in the crypto industry.
Asset Managers Seek Approval for Spot Bitcoin ETFs
Several asset managers, including BlackRock, Fidelity, WisdomTree, VanEck, Invesco, Ark Invest, and 21 Shares, have recently filed applications for spot bitcoin exchange-traded funds (ETFs). These applications are currently pending approval from the US Securities and Exchange Commission (SEC), with some facing imminent deadlines before the Labor Day holiday weekend.
According to an SEC spokesperson, the agency is currently reviewing the court’s decision and weighing its options for next steps. It is important to note that the court order does not require immediate approval of Grayscale’s application, but rather a reevaluation. This leaves open the possibility that the SEC may find alternative grounds for rejecting the application.
Tim Bevan, CEO of ETC Group, believes that the SEC will vigorously contest the ruling. Despite a recent federal judge’s determination that XRP, a token associated with Ripple Labs, is not a security when sold on digital-asset exchanges, the SEC has expressed its intent to appeal the decision.
While it remains uncertain how the SEC will ultimately respond to these ETF applications, Bevan anticipates that a block approval of qualifying applications may occur in Q1 of 2024. In such a scenario, significant inflows into bitcoin are expected, resulting in substantial price increases due to its fixed supply, as highlighted by Edelman.
In addition, a spot bitcoin ETF approval would provide financial advisors with a safer and more accessible means of investing in cryptocurrency, according to Bitwise’s Hougan. Overall, market participants eagerly await the SEC’s resolution on these filings.