April 17, 2024

SEC Disapproves Skybridge’s Spot BTC ETF Application

Today, a filing by the SEC disapproved First Trust’s Skybridge’s spot BTC ETF application. The top financial cited lack of investor protection and the lack of clarity on preventing sharp financial practices.

What Went Wrong?

This Skybridge application was first submitted in March last year, with the SEC postponing its approval or disapproval decision in July and November last year. The SEC further indicted the NYSE, through which Skybridge submitted its application, saying that “based on the exchange act, the NYSE doesn’t have the required qualifications to list a financial product.”

The SEC announcement stated that a surveillance-sharing agreement between the exchange and a vast regulated market with listed crypto assets must be in place before an exchange can seek the agency’s approval in listing a BTC ETP.

While applying for Skybridge’s BTC ETF, the NYSE cited the example of a $12m market order involving BTC transactions to claim that such transactions have little to no effect on the market.

Arguments And Counter-Arguments

The exchange also cited the example of Tesla’s BTC acquisition early last year. It stated that tesla investors were exposed to indirect BTC investments. Hence, it argued that there should be a better alternative to BTC exposure than the usual BTC proxies where investors are exposed to more risks.

However, the agency disproved the NYSE’s claims stating that it used the same criteria in disapproving VanEck’s and WisdomTree’s BTC ETF proposal. As of this writing, the SEC is yet to approve any spot crypto-related ETF. It has only authorized crypto-related futures such as Valkyrie and Proshares.

Whether the SEC would approve the spot BTC ETF proposal submitted by NYDIG and Fidelity Investment is unknown. The SEC failed to decide these applications when it met five days ago. The agency is expected to decide in two weeks.’ However, disapproval may be the likeliest possible outcome based on the agency’s antecedents. Many industry experts, institutional investors, and crypto-friendly lawmakers have publicly criticized the SEC for the several pending applications on its purpose. 

Reps from Minnesota and Florida sent a formal letter to Gensler two months ago advocating that it is still within the purview of asset management firms (such as grayscale investments) offering regulated products to invest in virtual currencies. The SEC is yet to approve grayscale’s spot BTC ETF even though it was among the first few AUMs to submit such a proposal to the SEC. 

Is Russia Paving The Way For Digital Ruble? 

Meanwhile, Russia’s apex bank has sought the authorities’ approval in issuing a total ban on all kinds of cryptocurrencies. The bank cited environmental issues and infiltration of its anti-money laundering as reasons for its request.

The bank made its request through a 40-page dossier citing reasons for the ban. While Russia’s apex bank might have mentioned other grounds for the ban, some industry experts claim that Russia’s crypto ban might be a way it is preparing for the launch and broader adoption of the e-Ruble.

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