In June 2023, a new round of Bitcoin spot ETF applications led by BlackRock caused the price of Bitcoin to rise by 20% in a week, soaring from $25,000 to $30,000. The news of Grayscale's successful lawsuit yesterday caused the recent sluggish Bitcoin price to rebound by 5% within 24 hours, rising back to a high of $28,000 from $26,000. The market's confidence in the successful approval of Bitcoin spot ETFs has once again been ignited.
Next, let's take a deeper look at the current status of the application for this round of Bitcoin spot ETFs and the important timeline for their potential approval.
I. Current Status of Bitcoin Spot ETF Applications in 2023
In June 2023, the asset management giant BlackRock submitted the application for iSharesBitcoinTrust, initiating a new round of competition for Bitcoin spot ETF applications. Stimulated by BlackRock, several investment/asset management institutions joined this competition. As of August 2023, including BlackRock, a total of 8 institutions have applied to the SEC for Bitcoin spot ETFs.
Summary of 2023 Bitcoin Spot ETF Information
According to the application process for Bitcoin spot ETFs published by the SEC, after the SEC announces 19b-4 in the Federal Register, the decision time for the ETF will begin to be calculated.
The decision time for the SEC for Bitcoin spot ETF applications totals 240 days. There will be 3 public replies in the process, with intervals of 45 days, 45 days, 90 days, and 60 days for the reply dates. In other words, before the SEC issues the final decision (approval or rejection), the SEC can have 3 opportunities to defer the application result for the ETF. At the same time, the SEC has the right to approve or reject the application at any time during the decision process.
The specific application process for Bitcoin spot ETFs is as follows:
Taking BlackRock as an example, the SEC published the 19b-4 rule change document for iShares Bitcoin Trust in the Federal Register on July 19. Therefore, 45 days after July 19 is the deadline for the first reply for iShares Bitcoin Trust, which is September 2. If the SEC decides to defer the decision time before this deadline, the next reply will be postponed for 45 days. The final reply date for iShares Bitcoin Trust is March 15, 2024, 240 days later.
Below, we have listed the specific application information for these 8 institutions, including the project name, listing exchange, sponsor, trustee, custodian, application-related time, and historical application status.
BlackRock
Project Name: iShares Bitcoin Trust
Exchange: Nasdaq
Sponsor: BlackRock Fund Advisors
Trustee: Delaware statutory trust
Bitcoin Custodian: CoinbaseCustody Trust Company, LLC
Cash Custodian: Bank of New York Mellon
The Bitcoin custodian and cash custodian together are referred to as the custodian.
Application-related time:
Nasdaq submitted the proposed rule change document to the SEC on June 29, 2023.
The notification publication date on the Federal Register was July 19.
First reply date: September 2
Historical application status: None
Fidelity
Project Name: Wise Origin Bitcoin Trust
Exchange: Cboe BZX
Sponsor: FD Funds Management LLC
Trustee: Delaware Trust Company
Manager: Fidelity Service Company, Inc. (FSC)
Transfer agent: Third-party institution (no specific information yet)
Market agent: Fidelity Distributors Corporation
Bitcoin Custodian: Fidelity Digital Assets Services, LLC (FDAS)
Application-related time:
Cboe BZX submitted the proposed rule change document to the SEC on June 30, 2023.
The notification publication date on the Federal Register was July 19.
First reply date: September 2
Historical application status:
Fidelity submitted a spot ETF application in May 2021 and was rejected in February 2022.
ArkInvest
Project Name: ARK 21SharesBitcoin ETF
Exchange: Cboe BZX
Sponsor: 21Shares US LLC
Trustee: Delaware Trust Company
Cash Custodian (Transfer agent): Bank of New York Mellon
Manager: Bank of New York Mellon
Market agent: Foreside Global Services, LLC
Custodian: Coinbase Custody Trust Company, LLC
Market assistant: ARK Investment Management LLC
Application-related time:
Cboe BZX submitted the proposed rule change document to the SEC on April 25, 2023.
The notification publication date on the Federal Register was May 15.
First reply date: June 29 (SEC decided to defer the decision)
Reason for rejection: The committee believed that more time was needed to review the issues in the rule change, so the decision time was postponed.
On June 30, the exchange submitted Amendment No. 2; on July 11, it submitted Amendment No. 3.
Second reply date: August 13 (SEC decided to defer the decision)
On August 11, the SEC issued a document soliciting opinions on Amendment No. 3, and the decision time was postponed again.
Historical application status:
Ark Invest previously submitted two spot ETF applications, both of which were rejected in 2021 and 2022.
Invesco
Project Name: InvescoGalaxyBitcoin ETF
The name "Galaxy" comes from the fact that this ETF tracks the Bloomberg Galaxy Bitcoin Index.
Exchange: Cboe BZX
Sponsor: Invesco Capital Management LLC
Trustee: Delaware Trust Company
Custodian: U.S. third-party trust company and qualified custodian (no specific information yet)
Manager: Mature global fund manager (no specific information yet)
Transfer agent: Third-party institution (no specific information yet)
Application-related time:
Cboe BZX submitted the proposed rule change document to the SEC on June 30, 2023.
The notification publication date on the Federal Register was July 19.
First reply date: September 2
Historical application status:
Invesco and Galaxy jointly submitted a spot ETF application in September 2021 and withdrew the application in the same year.
WisdomTree
Project Name: WisdomTree Bitcoin Trust
Exchange: Cboe BZX
Sponsor: WisdomTree Digital Commodity Services, LLC
Trustee: Delaware Trust Company
Manager/Transfer agent: U.S. Bank Global Fund Services
Custodian: U.S. Bank, National Association
Application-related time:
Cboe BZX submitted the proposed rule change document to the SEC on June 30, 2023.
The notification publication date on the Federal Register was July 19.
First reply date: September 2
Historical application status:
WisdomTree previously submitted two spot ETF applications, both of which were rejected in March 2021 and January 2022.
VanEck
Project Name: VanEck Bitcoin Trust
Exchange: Cboe BZX
Sponsor: VanEck Digital Assets, LLC
Trustee: Delaware Trust Company
Manager/Transfer agent: TheState StreetBank and Trust Company
Market assistant: Van Eck Securities Corporation
Bitcoin Custodian: Third-party qualified custodian (no specific information yet)
Application-related time:
Cboe BZX submitted the proposed rule change document to the SEC on June 30, 2023.
The notification publication date on the Federal Register was July 19.
First reply date: September 2
Historical application status:
VanEck first submitted a Bitcoin spot ETF application in June 2018 and withdrew the application in September 2019. Subsequently, VanEck submitted spot ETF applications in March 2021 and June 2022, both of which were rejected.
Bitwise
Project Name: Bitwise Bitcoin ETP Trust
Exchange: NYSEArca
Sponsor: Bitwise Investment Advisers, LLC
Trustee: Delaware Trust Company
Cash Custodian (Transfer agent): Third-party service provider (no specific information yet)
Bitcoin Custodian: Third-party custodian (no specific information yet)
Application-related time:
NYSE Arca submitted the proposed rule change document to the SEC on June 28, 2023.
The notification publication date on the Federal Register was July 18.
First reply date: September 1
Historical application status:
Bitwise submitted a spot ETF application in October 2021 and was rejected in June 2022.
Valkyrie
Project Name: Valkyrie Bitcoin Fund
Exchange: Nasdaq
Sponsor: Valkyrie Digital Assets, LLC
Trustee: Delaware Trust Company
Bitcoin Custodian: Third-party qualified custodian (no specific information yet)
Manager/Transfer agent: U.S. Bank Global Fund Services
Application-related time:
Nasdaq submitted the proposed rule change document to the SEC on July 3, 2023.
The notification publication date on the Federal Register was July 21.
First reply date: September 4
Historical application status:
Valkyrie submitted a spot ETF application in April 2021 and was rejected in December 2021.
All the above information is from the SEC Federal Register.
Summary
Ark Invest's ARK 21Shares Bitcoin ETF was the earliest spot ETF application in this round, and it has experienced two replies, both of which were delayed. The first reply dates for the remaining ETFs are all in early September.
Except for BlackRock, the other companies all have experience in applying for Bitcoin spot ETFs. Among them, VanEck has the most extensive experience. Since 2018, it has applied for Bitcoin spot ETFs three times.
All 8 ETF application documents have added the rejection reasons repeatedly mentioned in the 2021 applications, the Surveillance Sharing Agreement (SSA).
The applications for all 8 ETFs propose trading on one of the three exchanges: Nasdaq, Cboe BZX, and NYSE Arca. Among them, Cboe BZX accounts for the largest proportion, with 5 out of 8. This may be related to Cboe BZX's positive attitude towards cryptocurrencies and their derivatives.
The detailed information in the application documents for the 8 ETFs varies slightly. For example, Valkyrie and VanEck did not disclose detailed custodian information.
II. Can Bitcoin Spot ETFs Be Successfully Approved
There is a high probability of successful approval for this round of Bitcoin spot ETF applications. The main reason for this is the high success rate of BlackRock's ETF application and the inclusion of the Surveillance Sharing Agreement (SSA).
Success Rate of BlackRock's ETF Application
BlackRock is known for issuing index-tracking funds. Its flagship fund product (iShares) holds nearly half of the market share in the U.S. ETF market. BlackRock has extensive experience and a high success rate in obtaining ETF approvals. According to statistics, its ETF application success rate is close to 100%, with 575 out of 576 approvals. The only failure was a jointly submitted actively managed ETF with Precidian Investments, and the reason for rejection given by the SEC was a lack of transparency in profitability.
Surveillance Sharing Agreement (SSA)
The application documents for the 8 institutions' ETFs all include the Surveillance Sharing Agreement (SSA), which was repeatedly mentioned in the rejection reasons for previous Bitcoin spot ETFs.
The SSA, full name Surveillance-Sharing Agreement, is an agreement between cryptocurrency exchanges and market regulatory agencies. This agreement allows both parties to share trading data and information for monitoring transactions. If there is suspicious trading data or information, this information will be simultaneously sent to regulatory agencies, ETF issuers, and exchanges. The SSA is usually used in cases involving financial products such as ETFs. It can enhance the effectiveness of financial market monitoring and help regulatory agencies monitor market manipulation, fraudulent activities, and other improper trading behaviors.
The inclusion of the SSA in the application documents this time will likely loosen the SEC's stance on preventing fraud and market manipulation. At the very least, the SEC cannot give the same rejection reasons as in 2021.
Which ETFs Are Likely to Be Approved
Looking at the application dates, except for Ark Invest, all 8 institutions submitted their applications to the SEC at almost the same time. It is hard not to suspect whether they have received some information and believe that the SEC may approve the issuance of Bitcoin spot ETFs this year. Of course, we cannot verify whether such information really exists. But the attitude conveyed in this process is undoubtedly positive.
At the same time, because the reply dates are very close, it is very likely that multiple ETFs will be approved or delayed at the same time. The proposed rule change documents for these ETFs are quite similar and all include the Surveillance Sharing Agreement (SSA). Therefore, the SEC has no reason to reject one and approve another. In other words, if BlackRock's Bitcoin spot ETF is approved, there is a high probability that the ETF applications submitted by other institutions will also be approved.
III. Predicted Approval Time
Based on the previous approval situation of Bitcoin spot ETFs, the probability of these ETFs being approved after the first and second replies is very small. The SEC's applications for Bitcoin spot ETFs usually choose to delay for the full 240 days and then make a decision to reject. Although the SEC cannot use the same reasons to reject spot ETF applications this time, due to its consistent attitude towards the crypto market, it is likely to search for other reasons to delay the application reply. Finally, close to the final reply date, a decision will be made.
On the other hand, the choice of Bitcoin custodian in the ETF may also be a key point affecting the SEC's decision. For Bitcoin spot ETFs, the Bitcoin custodian needs to have sufficient influence and experience in the crypto field and be recognized by the SEC (able to supervise transactions as a trading supervisor). For example, BlackRock explicitly stated in the ETF application document that it would use Coinbase as the Bitcoin custodian. The previous lawsuit between Coinbase and the SEC may to some extent affect the final decision of the application. Although the lawsuit is not related to Bitcoin itself, it may result in a delay in the application.
Therefore, we predict that the most likely time for this round of Bitcoin spot ETFs to be approved will be 240 days after the publication of the 19b-4 notice in the Federal Register, which is the final reply date.
Based on the publication dates of the rule change documents for each ETF application in the Federal Register, the possible approval times for the 8 institutions' ETFs are as follows:
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