Cracking the Code: How the SEC Decides on Bitcoin ETF

The approval of Bitcoin Exchange-Traded Funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) has been a long-awaited event in the cryptocurrency and financial markets. The potential of Bitcoin ETFs to bridge the gap between traditional finance and the burgeoning field of digital assets is significant. However, the SEC’s meticulous evaluation has left many proposals in limbo. The question remains: Will the SEC approve a Bitcoin ETF, and if so, when? This uncertainty forms the crux of the ongoing debate surrounding Bitcoin ETFs.


Imagine a world where investing in Bitcoin is as simple as buying company shares. No need to worry about digital wallets, private keys, or the fear of digital theft. This is the promise of Bitcoin Exchange-Traded Funds (ETFs). It holds significant importance in the ecosystem of cryptocurrency and financial markets. These ETFs serve as a bridge, connecting the traditional finance sector with the rapidly evolving field of digital assets. They offer a regulated and accessible investment avenue, potentially attracting a diverse array of investors – from Wall Street hedge funds to Silicon Valley tech firms and even everyday retail investors. 

Bitcoin ETFs enable investors to gain exposure to Bitcoin’s price movements traded on the Chicago Mercantile Exchange (CME) without the need to directly own or manage the digital asset. This simplifies access to this new asset class and opens opportunities for a wider range of investors. It also removes the need to physically own or manage crypto, which can get tricky even for experienced users due to the plethora of hacks and scams.

The Importance of Bitcoin ETF Approval

The excitement surrounding Bitcoin ETFs is apparent throughout the crypto community and among investors. The grounds for this enthusiasm are numerous and are based on the possible benefits that a Bitcoin ETF could bring to the table. The approval of a Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC) would signal a major step forward in the mainstream acceptance of cryptocurrencies. So what are these benefits that stem so much eagerness around Bitcoin ETFs:

  • A Bitcoin ETF provides a straightforward way for investors to gain exposure to Bitcoin without dealing with the complexities of buying and storing the cryptocurrency. 
  • Bitcoin ETFs offer a regulated investment avenue, making them an attractive option for institutional investors and individuals who prefer to operate within the regulated financial system.
  • ETFs are traded on traditional stock exchanges. This familiarity can lower the entry barrier for those investing in Bitcoin.
  • Investing in a Bitcoin ETF provides leverage to the price of Bitcoin. This means that investors can benefit from price movements without owning the asset.
  • The approval of a Bitcoin ETF could open up the cryptocurrency market to a broader audience, including those who have been hesitant due to the perceived risks and complexities associated with digital assets.
  • Bitcoin ETFs are considered to be more tax-efficient than investing in Bitcoin directly, as they are traded on regulated exchanges and are subject to stricter oversight.
  • Investing in Bitcoin ETFs can help investors to diversify their risk portfolios. This is because a basket of Bitcoin and other assets, such as Bitcoin futures contracts, typically backs Bitcoin ETFs.
  • It is easier to get Bitcoin investment exposure in an IRA through an ETF. This is because Bitcoin ETFs are regulated and traded on exchanges, which makes them more accessible to IRA providers.

The Bitcoin ETF Approval Process

The evaluation of Bitcoin ETF proposals by the SEC is a rigorous and multi-faceted process that involves thorough scrutiny of various aspects of the proposed fund. Here’s a detailed step-by-step explanation of the evaluation process:

  1. Initial Filing – The process begins with the applicant submitting a detailed registration statement to the SEC, Form S-1, which outlines the fund’s structure, investment objectives, risks, and proposed operations.
  2. Publication in the Federal Register – Once the SEC receives the registration statement, it publishes a notice in the Federal Register, initiating a 45-day public comment period. During this period, interested parties can submit comments and concerns regarding the proposed ETF.
  3. SEC Review and Comment Period – The SEC thoroughly reviews the registration statement, considering factors such as the fund’s investment strategy, custody arrangements, pricing mechanism, and potential risks. Public comments are also considered that are received during the comment period.
  4. Request for Additional Information – If the SEC deems it necessary, it may request additional information (RFI) from the applicant. The RFI seeks clarification or further details on specific aspects of the proposal. The applicant must respond to the RFI within a specified timeframe.
  5. Amendments and Further Review – Based on the SEC’s review and the applicant’s responses, the applicant may need to amend the registration statement to address any concerns raised. The SEC continues to review the amended filings until satisfied with the proposal.
  6. Approval or Disapproval – After a thorough evaluation, the SEC decides whether to approve or disapprove the Bitcoin ETF proposal. If approved, the ETF can begin trading on the designated exchange. If disapproved, the applicant may appeal the decision or submit a revised proposal.

The SEC evaluates Bitcoin ETF proposals against stringent criteria to ensure investor protection and market integrity. Key criteria include:

  • Custody Arrangements – The adequacy of the proposed custody arrangements for safeguarding the underlying Bitcoin assets.
  • Market Surveillance – Whether the underlying Bitcoin market has sufficient surveillance mechanisms to prevent manipulation, fraud, and other illicit activities.
  • Liquidity – The liquidity of the underlying Bitcoin market to ensure that the ETF can be traded without causing significant price distortions.
  • Arbitrage Mechanism – The proposed arbitrage mechanism to ensure that the ETF’s price closely tracks the underlying Bitcoin price.

For the registration statement to be submitted by the applicant, it must include comprehensive documentation and satisfy specific requirements, including:

  • A detailed description of the fund’s investment objectives, strategies, risks, and fees.
  • Copies of custody agreements with qualified custodians for safeguarding Bitcoin assets.
  • A detailed explanation of how pricing will be determined for ETF shares.
  • A comprehensive disclosure of potential risks associated with investing in Bitcoin ETFs.
  • All relevant legal and compliance documents, such as fund prospectus and organizational documents.

The SEC’s Concerns and Hurdles

The SEC has several concerns and challenges regarding Bitcoin ETFs including points like:

  1. Market Manipulation and Fraud – The SEC is worried about the potential for manipulation in the Bitcoin market, which could lead to unfair practices and financial losses for investors.
  2. Investor Protection – The SEC wants to ensure that investors understand the risks associated with Bitcoin ETFs, such as price volatility and regulatory risks.
  3. Custody and Security – The SEC requires that Bitcoin ETFs have robust custody and security measures to prevent theft or unauthorized access to the underlying Bitcoin assets.
  4. Transparency and Fair Pricing – The SEC aims to ensure that Bitcoin ETFs are traded transparently and that their prices closely track the underlying Bitcoin price.
  5. Lack of Clarity – The SEC has expressed concerns about the lack of clarity in some applications for Bitcoin ETFs.
  6. Higher Standard for Bitcoin ETFs – Some believe that the SEC is holding Bitcoin ETFs to a higher standard than other commodities, which could be seen as a violation of their statutory authority.
  7. Intricate Challenges and Evolving Dynamics – The ongoing discourse around Bitcoin ETFs highlights the intricate challenges and evolving dynamics of this area.

Recent Bitcoin ETF Proposals

The SEC is currently reviewing five Bitcoin ETF proposals. The SEC has extended the deadlines for making decisions on these proposals to October 26, 2023. However, it seems very unclear when the SEC will decide on any of the proposals.

  1. BlackRock filed for a spot Bitcoin ETF on June 15, 2023.
  2. Invesco first applied for its Invesco Galaxy Bitcoin ETF jointly with Galaxy Digital on Sept. 22, 2021. They refiled their application in July 2023.
  3. Bitwise first filed for a spot bitcoin ETF in October 2021, and they refiled their application in June 2023.
  4. Valkyrie filed its first spot Bitcoin ETF application in January 2021 and then refiled its application on June 21, 2023.
  5. WisdomTree first filed the spot Bitcoin ETF application on Jan. 25, 2022, and they refiled their application on June 21, 2023.

Latest updates on these ETFs

  1. BlackRock – The SEC has delayed its decision on BlackRock’s spot Bitcoin ETF proposal. The firm has made changes to its proposal, bringing it one step closer to approval. However, the SEC has not yet made a final decision.
  2. Invesco – The SEC has delayed its decision on Invesco’s spot Bitcoin ETF proposal. Invesco has refiled its application in response to feedback and queries raised by the SEC.
  3. Bitwise – Bitwise has resubmitted its amended proposal for a Bitcoin ETF in response to feedback and queries raised by the SEC. 
  4. Valkyrie – The SEC has delayed its decision on Valkyrie’s spot Bitcoin ETF proposal. Valkyrie has made key changes to its Bitcoin ETF proposal, which could be a sign of approval.
  5. WisdomTree – The SEC originally had a deadline to decide on the WisdomTree Bitcoin ETF proposal. The SEC extended the deadline to October 26, 2023.


As we wrap up this discussion on Bitcoin ETFs, we’re left on the edge of our seats. The U.S. Securities and Exchange Commission (SEC), the gatekeeper to this future, continues to deliberate. Each proposal, each document, and each public comment is another piece of the puzzle, another step towards a decision that could redefine the cryptocurrency landscape. Will they give the green light and open the floodgates for mainstream investors to dive into Bitcoin? Or will worries about market manipulation and investor protection cause them to hit the brakes? The crypto world is waiting, hopeful but unsure. As we conclude this exploration into the world of Bitcoin ETFs, one thing is clear: change is coming. But what form it will take remains shrouded in suspense. 

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