A federal judge has overturned the US Securities and Exchange Commission’s (SEC) decision to deny the provision of Exchange-Traded Fund (ETF) by Grayscale Investments through its Bitcoin Trust. However, many experts have pointed out that the court’s ruling doesn’t necessarily mean an immediate approval of the first Bitcoin ETF.
Up to this point, the SEC has rejected all applications for physically-settled cryptocurrency ETFs in the US, despite several applications under review. These applications come from companies like BlackRock, ARK Invest, Bitwise Asset Management, VanEck, WisdomTree, Invesco, Galaxy Digital, Fidelity, and Valkyrie. The Commission has the authority to continue postponing decisions or extending the final approval deadline for most of these applications until March 2024.
At the time of the announcement, the SEC had not publicly commented on the appellate court’s decision. However, sources suggest they will review the case to determine the next steps. The Commission may have the option to appeal this decision, but many experts have stated that Grayscale’s initial victory could pave the way for eventual approval.
Tim Bevan, the CEO of ETC Group, stated, “Despite the inevitable deliberation by the SEC, in our view, there is now no longer any doubt that physically-settled BTC ETFs are coming to the US.” “We don’t believe that the SEC will be kingmaker, and the outcome could well be a deluge of applications meeting the requirements, perhaps as soon as Q1/24.”
CEO and co-founder of Lolli, Alex Adelman, noted that the appellate court’s ruling would “add pressure on the SEC” to justify the denial of applications for physically-settled Bitcoin ETFs. He added that the BTC price increase following this news could be seen as a “vote of confidence” for the Bitcoin-related physically-settled investment vehicles:
“Now is the time for the US to embrace innovation by providing bitcoin to investors through exchange-traded products or risk falling behind global powerhouses that are moving faster to assert this advantage.”
A spokesperson from the Cryptocurrency Innovation Council (CCI) stated that the ruling has opened up opportunities for more investors seeking to access physically-settled BTC instruments in the US. According to the CCI, “physically-settled bitcoin ETFs are now closer to potential launch.”
The next steps for Grayscale to proceed with the application or for the SEC to appeal the decision are not yet clear. The asset manager could resubmit the filing to the SEC, aiming to align the physically-settled investment application more closely with ETF applications linked to Bitcoin futures. Experts are also reporting that the SEC could opt for an “en banc” rehearing, in which all judges on the DC circuit – rather than three judges ruling on Grayscale’s appeal – would consider the matter.