The U.S. Securities and Exchange Commission (SEC) announced on Monday (May 20) that it needed more time to consider the VanEck–SolidX Bitcoin ETF proposal. This delay also gives interested parties more time to comment on the proposal and address the SEC's main concerns.
On 30 January 2019, Cboe BZX Exchange ("BZX") filed with the SEC a proposed rule change to list/trade shares of "SolidX Bitcoin Shares", which would be issued by the VanEck SolidX Bitcoin Trust. This proposed rule change was published in the Federal Register on 20 February 2019. It then had 45 days to approve, disapprove, or ask for a delay.
(Note, however, that BZX had filed its original proposal back in June 2018; the SEC delayed a decision on this proposal several times, and February 27 was the final deadline for the SEC to make a decision. However, due to the U.S. government shutdown that occurred in December 2018 and ended in January 2019, the SEC was partially out of action during this period. By the time that the SEC fully operational again, there was only a few weeks left till the final deadline. So, to give this Bitcoin ETF proposal the best chance of success, on 22 January 2019, BZX withdrew its original proposal, and re-applied (in order to reset the clock) on 30 January 2019.)
Anyway, on 29 March 2019, the SEC released a notice to say that it had selected 21 May 2019 as the date by which it should approve, disapprove, or ask for a further delay to consider the grounds for disapproving the Bitcoin ETF proposal. Why 21 May 2019? Because 90 days is the maximum amount of time it could ask for, and 21 May 2019 is 90 days from 20 February 2019, which was the date that the proposal got published in the Federal Register.
Well, yesterday (i.e. just one day before the expiry of the 90-day deadline), the SEC decided to delay making a decision, and this time it had to provide "notice of the grounds for disapproval under consideration" (i.e. explain why it thinks that it might deny the proposal).
Here are a few of the SEC's concerns, and it is inviting the ETF's sponsor, i.e. BZX, and other interested parties to provide written comments (in either electronic or paper form):
- Has BZX "entered into a surveillance-sharing agreement with a regulated market of significant size related to bitcoin?"
- What is the relationship between the Bitcoin futures market and the Bitcoin spot market?
- The proposed Bitcoin ETF uses "a non-public, proprietary index to value holdings based on OTC activity", but is this really "an appropriate means to calculate the NAV of an exchange-traded product"?
- BZX has said in its proposal that it "has entered into a comprehensive surveillance sharing agreement with the Gemini Exchange and is working to establish similar agreements with other bitcoin venues." But is the Gemini digital asset exchange "a regulated market of significant size"?
Any arguments regarding whether the proposal should be approved or disapproved need to be submitted within 21 days of publication in the Federal Register of yesterday's order (Release No. 34-85896; File No. SR-CboeBZX-2019-004), and anyone who wants to "file a rebuttal to any other person’s submission" must do so no later than within 35 days of the date of publication in the Federal Register.
The following tweets were sent out on May 19, i.e. the day before the SEC made this latest announcement, by Crypto Twitter's favorite U.S. attorney, Jake Chervinsky:
8/ First, I'd be shocked if the SEC approved the first ever bitcoin ETF after six years of denials without taking all the time allowed by law. Moving slowly makes the SEC appear thoughtful & thorough.— Jake Chervinsky (@jchervinsky) May 19, 2019
VanEck's final deadline is October 18. An early decision likely means denial.
9/ Second, market conditions don't support early approval.— Jake Chervinsky (@jchervinsky) May 19, 2019
Bitcoin has been very volatile recently & investigations related to fraud & manipulation have ramped up (like NYAG & Bitfinex). The SEC has no reason or incentive to come out in favor of bitcoin in this environment.
17/ So, heading into Monday, here's how I view the probabilities:— Jake Chervinsky (@jchervinsky) May 19, 2019
- Delay: 75.0%
- Denial: 24.9%
- Approval: 0.1%
I'll keep you updated as the process plays out.
According to Chervinsky, "VanEck's new deadline is August 19," and the "SEC can & likely will delay one more time for a final deadline of October 18."
This is how Gabor Gurbacs, Director of Digital Assets Strategy at VanEck/MVIS, expressed his personal thoughts on the SEC's ultra cautious attitude towards Bitcoin ETFs:
Investors deserve fair & orderly markets & better protections when investing in digital assets. A #Bitcoin #ETF may provide a more transparent, liquid and regulated option. Delaying decisions forces investors to invest in less safe/transparent options. https://t.co/PQc3RIdlHk— Gabor Gurbacs (@gaborgurbacs) May 20, 2019
The SEC choosing to delay making a decision on the VanEck Bitcoin ETF proposal did not come as a surprise to the crypto markets, which reacted very calmly (Bitcoin's price only went down slightly), and in fact, at press time (11:00 UTC on May 21), according to data from CryptoCompare, Bitcoin is trading at $7,945, up 0.33% in the past 24-hour period: