Crypto investors are eagerly awaiting an imminent ruling from the U.S. Securities and Exchange Commission that will likely approve the trading of a spot bitcoin exchange-traded fund, more than a decade after initial attempts were rejected.
13 companies have filed for a spot bitcoin ETF:
- Grayscale Bitcoin Trust
- Ark/21Shares Bitcoin Trust
- Bitwise Bitcoin ETF Trust
- BlackRock Bitcoin ETF Trust
- VanEck Bitcoin Trust
- WisdomTree Bitcoin Trust
- Valkyrie Bitcoin Fund
- Invesco Galaxy Bitcoin ETF
- Fidelity Wise Origin Bitcoin Trust
- Global X Bitcoin Trust
- Hashdex Bitcoin ETF
- Franklin Templeton Digital Holdings Trust
- Pando Asset Spot Bitcoin Trust
How the SEC will proceed
There are two components to the applications:
1) A 19b-4 filing, which is a form used by exchanges to inform the SEC of a proposed rule change. In this case, a rule change is required under the Securities Exchange Act of 1934 because a spot bitcoin ETF is a new product, and the exchanges — NYSE, Nasdaq and Cboe — must provide rules to explain how the product will trade. The SEC must approve the rule changes before the product can trade. This is the filing that is facing a deadline of Jan. 10 for the Ark/21Shares Bitcoin Trust.
2) Approval of S-1. This is a filing to register a new security with the SEC, in a document that provides information about the specific security. In this case, each company filing for the spot bitcoin ETF has differences in the way the product might be structured. In the case of the Grayscale Bitcoin Trust, an S-3 filing must be approved, which is a simplified security registration form for businesses that have met other reporting requirements.
It’s widely anticipated that once the 19b-4 filings are approved, the SEC will separately approve the S-1 applications of all the ETF applicants at once. However, because the applications are different, that is not a slam dunk. The SEC may decide to approve some, but not all, of the S-1s.
Wide spread in fee
With 13 companies filing for a bitcoin ETF, all of which are similar products, there is substantial interest in what the fee structure will look like.
Fidelity’s Wise Origin Bitcoin Fund has announced it will charge 39 basis points, or 0.39%. Invesco’s Galaxy Bitcoin ETF has set its expense ratio at 59 basis points, which are waived for the initial six months and the first $5 billion in assets. Ark/21Shares and Valkyrie will charge 80 basis points.
Grayscale Bitcoin Trust currently charges 2% but has said it’s committed to lowering the fee once its application to convert to a bitcoin ETF is approved.
Other applicants have not yet announced their fee structure.
It is unclear who the main regulator of the crypto industry is
All this happens against the backdrop of SEC Chair Gary Gensler’s long-running fight with the crypto industry.
Gensler has fought several court battles against major crypto players, including a losing battle against Grayscale Bitcoin Trust, which won a case against the SEC last summer. In that case,…