A US federal court on 29 August ordered the Securities and Exchange Commission to vacate its rejection of Grayscale Investments’ application to convert its Bitcoin Trust product into an exchange-traded fund and the crypto industry is celebrating.
The ruling pushed the crypto industry “one big step closer” to gaining approval for a spot bitcoin ETF, according to Matt Hougan, chief executive officer at Bitwise Asset Management.
Bitcoin rallied more than 7% over the past 24 hours to as high as $28,127 on the day of the ruling, according to CoinDesk data. The crypto is up over 57% so far this year but is still down almost 60% from its all-time high in 2021.
DC Circuit Court of Appeals Judge Neomi Rao wrote in an opinion that the SEC’s decision to approve two bitcoin futures funds, but to deny applications for a bitcoin spot ETF, was “arbitrary and capricious” and in violation of federal administrative law.
“Assuming the SEC does not appeal, it is likely to result in quick approval of not only Grayscale’s spot bitcoin ETF application, but many of the other nine applications pending before the SEC as well,” according to Ric Edelman, Founder of the Digital Assets Council of Financial Professionals.
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A number of asset managers, such as BlackRock, Fidelity, WisdomTree, VanEck, Invesco, Ark Invest and 21 Shares have filed applications for spot bitcoin ETFs, pending the SEC’s approval. Several of them face deadlines before the Labor Day US holiday weekend.
The SEC is “reviewing the court’s decision to determine next steps”, according to an agency spokesperson.
The court order doesn’t require the SEC to immediately approve Grayscale’s application but to review the application again. It is possible the SEC could find another rationale for rejecting it.
Tim Bevan, chief executive at ETC Group, said he expects the SEC to fight against the ruling.
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In July, crypto bulls were excited that a federal judge ruled XRP, a token associated with Ripple Labs, isn’t a security when sold to the public in on digital-asset exchanges. The SEC later sought to appeal the ruling.
Still, “we don’t believe the SEC will act as kingmaker and the most likely outcome is a block approval of applications that meet requirements, probably in Q1’24,” Bevan wrote in emailed comments.
If a spot bitcoin ETF does get approved, “it is reasonable to expect significant inflows – and with a fixed supply, that would lead to material increases in bitcoin’s price,” noted Edelman.
“We think a spot bitcoin ETF will make it easier for financial advisors to safely access crypto,” according to Bitwise’s Hougan.
This article was published by MarketWatch, part of Dow Jones
