On Friday, the US Securities and Exchange Commission (SEC) will have to rule on a number of Bitcoin cash ETF applications, including that of the giant BlackRock. Can we hope for a turnaround, as the judges have described the SEC’s handling of Grayscale’s application as “arbitrary and capricious”?
The SEC will have to rule on Bitcoin cash ETFs
Yesterday was probably a historic day in the history of the tug-of-war between the Securities and Exchange Commission (SEC) and the cryptocurrency ecosystem: Grayscale, the world’s largest crypto fund manager, won its case against the regulator.
Grayscale had previously taken legal action against the SEC, which had denied it the right to convert its flagship product, the Grayscale Bitcoin Trust (GBTC), into a cash Bitcoin ETF, citing risks of market manipulation.
Grayscale’s victory is not only symbolic, but also very important from the point of view of the current timetable: the SEC will have to give its opinion on a large number of Bitcoin cash ETF applications in the next few days.
Starting on Friday, the SEC will have to give its opinion on applications for Bitcoin cash ETFs from 21Shares & Ark Invest, Bitwise, VanEck, WisdomTree, Invesco & Galaxy, Fidelity, Valkyrie, and above all BlackRock, the world’s largest asset manager.
BlackRock is in the spotlight not only because of its aura, but also because of its impressive ETF track record, with 575 applications accepted and only one rejected in its history.
The SEC will have to give an answer on 2 September, and it’s not impossible that fate will finally be in its favour before Grayscale.
Figure 1 – Timeline for Bitcoin cash ETFs
The crypto market is particularly sensitive to announcements concerning ETFs, as witnessed by the rise in the price of Bitcoin, which climbed 8% following the announcement of Grayscale’s victory.
Figure 2 – BTC price over 7 days
Note that the SEC is free to accept ETF applications or to extend the deadline to next October. Once the second deadline has been reached, it may also extend it a third time if it so wishes.
What will Grayscale’s victory mean for Bitcoin ETFs?
Grayscale’s victory is important because it will force the SEC to consolidate its cases further in order to justify its refusals, whereas until now the regulator had been content to sweep applications aside with a wave of the hand.
One of the judges in the Grayscale case pointed out the inconsistencies within the SEC itself, which refused the crypto fund’s application even though it had already authorised numerous Bitcoin future ETFs with much the same characteristics. The judge even called the decision “arbitrary and capricious”.
So, let’s not kid ourselves, the SEC is likely to push back the applications for Bitcoin cash ETFs expected soon, but it will have to redouble its efforts if it wants to reject them without suffering further lawsuits in return.
In this regard, it should be noted that the regulator will have to reconsider Grayscale’s application, and will therefore have to provide serious arguments if it wishes to take a position on refusal again, especially as the judges of the Court of Appeal have ruled against it.
Coinbase, which has been appointed as a financial partner for a number of ETF applications, also benefited from the announcement of Grayscale’s victory, with its BASE shares gaining 16% in the hours that followed.
