Grayscale is urging the Securities and Exchange Commission [SEC] to simultaneously approve all proposed spot Bitcoin exchange-traded funds [ETFs]. Grayscale aims to prevent any single entity from gaining an unfair advantage over others. On July 27, Grayscale’s Chief Legal Officer, Craig Salm, stated in a post that their legal team had submitted a letter addressing eight spot Bitcoin ETF filings. This included Grayscale’s own application. The letter emphasized that the SEC should decide on being fair and refrain from selecting “winners and losers.”
“Whether the SEC ultimately approves a spot bitcoin ETF following a Court mandate or through an evolution in its position on the matter, they should do so in a way that’s fair for all investors and issuers. Ultimately, this is about ensuring American investors are protected and have access to their choice of bitcoin investment vehicle.”
Additionally, in the past few days, various applicants like Invesco, BlackRock, Valkyrie, VanEck, Wisdom, Fidelity, and ARK Invest have updated their applications to include surveillance sharing agreements [SSAs] with Coinbase. However, Salm believed that this would not suffice for the SEC due to Coinbase not being a registered securities exchange under the SEC.
Examining the Potential Impact of Simultaneous Approval of Bitcoin ETFs
There has been increased hype around Bitcoin ETFs. BlackRocks’ application in particular brought about increased interest in these products. Earlier this month, Bloomberg Intelligence analyst James Seyffart said during a podcast,
“There are a significant number of clients who are waiting for their competitors to venture into Bitcoin first, to avoid tarnishing their own reputation by being the pioneers. If Blackrock were to issue an ETF, it would likely eliminate a considerable amount of the perceived negative connotation attached to crypto, potentially leading to significantly higher early investment inflows than what Proshares saw in 2021.”
The approval of multiple ETFs could pave the way for increased adoption in the crypto industry. Both retail and institutional investors may show greater interest in these digital assets, especially with prominent players like BlackRock, Fidelity, ARK Invest, and others entering the market as it gives the industry more credibility.
Seyffart pointed out that there is U.S. money invested in these Canadian ETFs, indicating the potential repatriation of funds. He added, the world’s first Bitcoin ETF recently celebrated its second anniversary. Even though the market faced hurdles during the bear market, crypto ETFs in Canada witnessed minimal net outflows in 2022.
“There’s US institutional money in other areas that might come back if a spot bitcoin ETF gets approved.”
The trading volume of crypto ETFs has closely mirrored the price movements of Bitcoin. In January 2023, the trading volume witnessed a significant 67% year-over-year decline. Trading activities in these ETFs have remained relatively subdued since July 2022. This comes with a slight increase in November 2022 during a period of increased market volatility. Despite this, the Canadian crypto ETF market is expanding, as the total number of crypto ETFs has reached an impressive 45, with the addition of four new crypto ETFs launched in 2022.
As a result of the potential approval of all Bitcoin ETFs, the United States could witness a surge in funds flowing into the market, while Canada might experience an increase in outflows.
The probability of all Bitcoin ETF applications receiving simultaneous approval appears low. This is primarily because each of them has different deadlines.