Author: TokenInsight
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 victory in the lawsuit yesterday caused the recent sluggish Bitcoin price to rebound by 5% within 24 hours, rising from $26,000 back to a high of $28,000. The market’s confidence in the successful approval of Bitcoin spot ETFs has once again been ignited.
Now let’s take a closer look at the current status of this round of Bitcoin spot ETF applications and the important time milestones for their potential approval.
1. Current Status of Bitcoin Spot ETF Applications in 2023
In June 2023, asset management giant BlackRock submitted an application for iShares Bitcoin Trust, kicking off a new round of competition for Bitcoin spot ETF applications. Inspired by BlackRock, several investment/asset management institutions have joined this competition. As of August 2023, including BlackRock, 8 institutions have applied for Bitcoin spot ETFs with the SEC.
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Summary of 2023 Bitcoin Spot ETF Information
According to the SEC’s published process for Bitcoin spot ETF applications, the decision time for the ETF will be calculated after the SEC publishes 19b-4 in the Federal Register.
The SEC’s decision time for Bitcoin spot ETF applications is a total of 240 days. There will be 3 public replies in between. The time intervals for the reply dates are 45 days, 45 days, 90 days, and 60 days, respectively. In other words, before the SEC issues the final decision (approval or rejection), the SEC has 3 opportunities to postpone the application results of 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, the deadline for the first reply for iShares Bitcoin Trust is 45 days after July 19, which is September 2. If the SEC decides to postpone the decision time before this deadline, the next reply will be postponed to 45 days later. The final reply date for iShares Bitcoin Trust is March 15, 2024, 240 days later.
Below, we list the specific application information of 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: Coinbase Custody Trust Company LLC
Cash Custodian: Bank of New York Mellon
Together, the Bitcoin custodian and the cash custodian are collectively referred to as the custodian.
Application Timeline:
Nasdaq filed a proposed rule change with the SEC on June 29, 2023.
The notice was published on the Federal Register on July 19.
First response date: September 2.
Historical Application Status: None
Fidelity
Application Project: 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 available)
Market Agent: Fidelity Distributors Corporation
Bitcoin Custodian: Fidelity Digital Assets Services, LLC (FDAS)
Application Timeline:
Cboe BZX filed a proposed rule change with the SEC on June 30, 2023.
The notice was published on the Federal Register on July 19.
First response date: September 2.
Historical Application Status:
Fidelity submitted a spot ETF application in May 2021, which was rejected in February 2022.
ArkInvest
Application Project: ARK 21Shares Bitcoin 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 Timeline:
Cboe BZX filed a proposed rule change with the SEC on April 25, 2023.
The notice was published on the Federal Register on May 15.
First response date: June 29 (SEC decided to delay the decision)
Reason for rejection: The committee believes that more time is needed to review the issues in the proposed rule change, so the decision was postponed.
On June 30, the exchange submitted Amendment No. 2; on July 11, Amendment No. 3 was submitted.
Second response date: August 13 (SEC decided to delay the decision)
On August 11, the SEC issued a document soliciting comments on Amendment No. 3, further delaying the decision date.
Historical Application Status:
Ark Invest previously submitted two spot ETF applications, one in 2021 and one in 2022, both of which were rejected.
Invesco
Application Project: Invesco Galaxy Bitcoin ETF
The name “Galaxy” in the ETF comes from tracking the Bloomberg Galaxy Bitcoin Index.
Exchange: Cboe BZX
Sponsor: Invesco Capital Management LLC
Trustee: Delaware Trust ComLianGuainy
Custodian: Third-party trust company and qualified custodian in the United States (no specific information available)
Manager: Mature global fund manager (no specific information available)
Transfer Agent: Third-party institution (no specific information available)
Application Timeline:
Cboe BZX filed the proposed rule change with the SEC on June 30, 2023.
Publication date on the Federal Register: July 19
First reply date: September 2
Historical Application:
Invesco and Galaxy jointly submitted a spot ETF application in September 2021, which was later withdrawn.
WisdomTree
Application: WisdomTree Bitcoin Trust
Exchange: Cboe BZX
Sponsor: WisdomTree Digital Commodity Services, LLC
Trustee: Delaware Trust ComLianGuainy
Manager/Transfer Agent: U.S. Bank Global Fund Services
Custodian: U.S. Bank, National Association
Application Timeline:
Cboe BZX filed the proposed rule change with the SEC on June 30, 2023.
Publication date on the Federal Register: July 19
First reply date: September 2
Historical Application:
WisdomTree previously submitted two spot ETF applications, in March 2021 and January 2022, both of which were rejected.
VanEck
Application: VanEck Bitcoin Trust
Exchange: Cboe BZX
Sponsor: VanEck Digital Assets, LLC
Trustee: Delaware Trust ComLianGuainy
Manager/Transfer Agent: The State Street Bank and Trust ComLianGuainy
Market Assistant: Van Eck Securities Corporation
Bitcoin Custodian: Third-party qualified custodian (no specific information available)
Application Timeline:
Cboe BZX filed the proposed rule change with the SEC on June 30, 2023.
Publication date on the Federal Register: July 19
First reply date: September 2
Historical Application:
Vaneck initially submitted a Bitcoin spot ETF application in June 2018, which was later withdrawn in September 2019. Subsequently, VanEck submitted spot ETF applications in March 2021 and June 2022, both of which were rejected.
Bitwise
Application: Bitwise Bitcoin ETP Trust
Exchange: NYSEArca
Sponsor: Bitwise Investment Advisers, LLC
Trustee: Delaware Trust ComLianGuainy
Cash Custodian (Transfer Agent): Third-party service provider (no specific information available)
Bitcoin Custodian: Third-party custodian (no clear information available)
Application Timeline:
NYSE Arca submitted proposed rule changes to the SEC on June 28, 2023.
The notification publication date on the Federal Register is July 18.
First response date: September 1.
Historical Application:
Bitwise submitted a spot ETF application in October 2021 and was rejected in June 2022.
Valkyrie
Application: Valkyrie Bitcoin Fund
Exchange: Nasdaq
Sponsor: Valkyrie Digital Assets, LLC
Trustee: Delaware Trust ComLianGuainy
Bitcoin Custodian: Third-party qualified custodian (no clear information available)
Manager/Transfer Agent: U.S. Bank Global Fund Services
Application Timeline:
Nasdaq submitted proposed rule changes to the SEC on July 3, 2023.
The notification publication date on the Federal Register is July 21.
First response date: September 4.
Historical Application:
Valkyrie submitted a spot ETF application in April 2021 and was rejected in December 2021.
All information above is from the SEC Federal Register.
Summary
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ARK 21Shares Bitcoin ETF from Ark Invest is the earliest spot Bitcoin ETF application in this round, and it has received two responses and both have been delayed. The first response dates for the remaining ETFs are all in early September.
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Except for BlackRock, all other companies have experience in applying for spot Bitcoin ETFs. Among them, VanEck has the most experience. Since 2018, it has had three spot Bitcoin ETF application experiences.
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All 8 ETF application documents have added the previously mentioned rejection reason, the Surveillance Sharing Agreement (SSA), from the 2021 application.
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All 8 ETF applications propose trading on one of the three exchanges: Nasdaq, Cboe BZX, and NYSE Arca. Among them, Cboe BZX has the largest proportion in the applications, accounting for 5 out of 8. This may be related to Cboe BZX’s positive attitude towards cryptocurrency assets and derivatives.
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The level of detail in the application documents for the 8 ETFs varies slightly. For example, Valkyrie and VanEck have not disclosed detailed custodian information.
II. Can Spot Bitcoin ETFs be Successfully Approved?
There is a high probability of successful approval for this round of spot Bitcoin ETF applications. The main reasons are the high success rate of BlackRock ETF applications and the inclusion of the Surveillance Sharing Agreement (SSA).
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BlackRock ETF Application Success Rate
BlackRock is known for its issuance of index-tracking funds. Its flagship fund, iShares, has a market share of nearly 50% in the US ETF market. BlackRock has a wealth of successful experience in obtaining ETF approvals. According to statistics, it has an approval rate of nearly 100% for ETF applications, with a total of 575 out of 576 approved. The only failure was a jointly submitted actively managed ETF by BlackRock and Precidian Investments, which was rejected by the SEC due to a lack of transparency in profitability.
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Surveillance-Sharing Agreement (SSA)
In this round of ETF applications by 8 institutions, all of them have added the Surveillance-Sharing Agreement (SSA) mentioned in the reasons for the multiple rejections of Bitcoin spot ETFs in the past.
SSA, the full name of 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 are suspicious trading data or information, this information will be simultaneously pushed to regulatory agencies, ETF issuers, and exchanges. SSA is usually used in the case of financial products such as ETFs. It can enhance the effectiveness of financial market monitoring and help regulatory agencies monitor market manipulation, fraudulent behavior, and other improper trading activities.
The inclusion of SSA in this round of applications is highly likely to loosen the SEC’s stance on fraud prevention and market manipulation. At the very least, this time the SEC cannot give the same rejection reasons as in 2021.
Which ETFs are likely to be approved?
From the application dates, except for Ark Invest, these 8 institutions have all chosen to submit their applications to the SEC at almost the same time. It is hard not to suspect that they may have received some information, believing that the SEC may approve the issuance of Bitcoin spot ETFs this year. Of course, we cannot verify whether such information exists. But the attitude conveyed in between 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 changes in these ETF filing documents are quite similar and all include the SSA. So 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 be approved as well.
III. Timeframe prediction for approval
Based on the approval situation of previous Bitcoin spot ETFs, the probability of this ETF being approved in the first or second reply is very small. The SEC tends to take the full 240 days for Bitcoin spot ETF applications 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 cryptocurrency market, it is likely to search for other reasons to delay the application reply. Finally, a decision will be made close to the final reply date.
On the other hand, the choice of Bitcoin custodians in ETFs may also be a key factor affecting the SEC’s decision. For Bitcoin spot ETFs, Bitcoin custodians need to have sufficient influence and experience in the cryptocurrency field, and they also need to be recognized by the SEC (able to be supervised by regulators). For example, BlackRock explicitly stated in its ETF application that it would use Coinbase as the Bitcoin custodian. However, Coinbase’s previous litigation with the SEC may have some impact on the final decision of the application. Although this litigation is essentially unrelated to Bitcoin, 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 Federal Register 19b-4 notice, which is the final response date.
Based on the publication time of each ETF application’s rule change document in the Federal Register, the possible approval dates for the 8 institutional ETFs are as follows:
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