Spot Bitcoin ETFs Could Soon See SEC Approval, Suggests Bernstein Analysis

Brokerage firm Bernstein on Monday stated that the U.S. Securities and Exchange Commission (SEC) may find it challenging to maintain its current position on spot Bitcoin BTC/USD exchange-traded funds (ETFs), suggesting that the chances of approval are relatively high.

The report highlights that the SEC has already given the green light to futures-based Bitcoin ETFs, including those that are leverage-based, on the grounds that futures pricing originates from a regulated exchange such as the CME, Coindesk reported.

However, the SEC has expressed concerns about the reliability of a spot Bitcoin ETF, citing that spot exchanges like Coinbase Global Inc COIN are not under its regulation, making spot prices susceptible to manipulation, according to the team of analysts led by Gautam Chhugani.

Despite receiving a multitude of applications, the SEC has yet to approve a spot Bitcoin ETF.

Last month, a BlackRock Inc BLK unit submitted paperwork for the establishment of a spot Bitcoin ETF, triggering other asset managers like Invesco and Wisdom Tree to apply or reapply for a Bitcoin ETF product.

The analysts also pointed out Grayscale's ongoing effort to transform its Grayscale Bitcoin Trust GBTC into an ETF, which is currently under consideration by an appeals court.

They noted that the court seemed unconvinced that the futures price is not influenced by the spot price, making it difficult to justify the approval of a futures-based ETF while denying a spot ETF.

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The report also mentioned a proposal from the industry for a surveillance agreement between the spot exchange operator and a regulated exchange like Nasdaq.

The absence of a Bitcoin spot ETF has led to the proliferation of over-the-counter products like the GBTC, which Bernstein describes as more costly, less liquid, and less efficient. 

The report concluded by suggesting that the SEC would prefer to introduce a regulated Bitcoin ETF led by mainstream Wall Street participants and monitored by existing regulated exchanges, rather than dealing with an over-the-counter product like Grayscale's that fills the institutional gap.

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