The Securities and Exchange Commission delayed making a decision again on whether to approve the first U.S. exchange-traded fund that invests directly in bitcoin, disappointing advocates just days after a court ruling that was viewed by many as clearing a path for the long-awaited product.
The securities regulator, whose three-part mandate includes investor protection, deferred on filings from Invesco, Valkyrie and WisdomTree, according to documents posted on its website Thursday. SEC Chair Gary Gensler has consistently justified the opposition to the ETFs as necessary to protect investors from an industry that he says is rife with fraud.
The decision comes after Grayscale Investments won a key victory over the SEC. On Tuesday, a federal appeals court overturned the agency’s rejection of Grayscale’s application to convert its bitcoin trust into an ETF. In the decision, the denial was called “arbitrary and capricious” because the commission failed to explain its different treatment of similar products. ETFs that hold bitcoin futures were approved in 2021.
The SEC has to address an application by Bitwise by the end of Friday. The regulator will also need to soon weigh in on filings from BlackRock, VanEck and Fidelity.
Bitcoin, which rallied Tuesday after the appeals panel decision, fell 4.2% to around $26,100 as of 4:03 p.m. in New York. Although the cryptocurrency is up more than 50% this year, it’s still trading at less than half its all-time high of almost $69,000 in late 2021.
The latest deferrals are the second in less than a month. On Aug. 11, officials punted on coming to a decision on a product from issuers 21Shares and ARK Investment Management.
Crypto proponents have argued for years that a so-called spot fund would be beneficial to investors and would, additionally, help bring the industry closer into the world of traditional finance. Having such a product would make it easier for money managers to access cryptocurrencies on their clients’ behalf, the argument went. It would also suggest maturity for the relatively nascent industry, which has been battling naysayers since its inception, and which has been skirmishing with regulators for years.
It’s difficult to overestimate how much excitement the mere idea of a spot-bitcoin product has brought about among some advocates, especially considering that some project these funds could end up raking in tens of billions of dollars.
Filings this year from Wall Street heavyweights such as BlackRock, Invesco and Fidelity had some analysts suggesting the SEC could be more open toward a bitcoin fund after years of failures to launch by various issuers. BlackRock, for one, has a near-pristine record in launching ETFs, and many saw its entrance into the race as a harbinger of an eventual debut.