What to know as an SEC decision on spot bitcoin ETFs looms

You’ve probably heard that the Securities and Exchange Commission could soon greenlight ETFs that hold bitcoin directly.

Such an approval would be a first for the US regulator.

The SEC has a Jan. 10 deadline to rule on one planned spot bitcoin ETF in particular: the fund proposed by Ark Invest and 21Shares. This is because they were the first — among the latest wave of 2023 filings — to re-submit an application for such a fund.

BlackRock entered the race to launch a spot bitcoin ETF in June, starting a cascade of new and renewed efforts from a dozen or so issuers.

Analysts expect the regulator could rule on the Ark-21Shares and BlackRock ETFs — as well as others by Fidelity, Bitwise, Invesco, Grayscale and others — at the same time. In the case of approval, lumping together a handful of decisions would prevent giving any one spot bitcoin ETF issuer a first-mover advantage.

Though the SEC could publish its ruling at any time, some industry watchers had predicted a decision between Jan. 8 and Jan. 10. This three-day window was highlighted in part because of moves made by the SEC to collect public feedback on certain planned ETFs until Jan. 5.

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Bloomberg Intelligence analyst James Seyffart doubled down on his estimate of an SEC decision next week in a Thursday X post.

What needs to happen before possible launches

A number of documents were filed in the bids to launch spot bitcoin ETFs.

Issuers have published Form S-1s, or registration statements, with details about how the fund would operate, its investment strategies and other details. Grayscale was eligible to use the S-3 form — a similar simplified document — in part because GBTC became an SEC reporting company in January 2020.

Fund groups have been amending these registration statements in recent weeks — revealing authorized participants, fees and specifics around creation and redemption models, for example.

More updates to S-1s, and Grayscale’s S-3 could be coming, as it appears issuers will look to respond to any SEC comments.

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Another required filing for the spot bitcoin ETFs is a 19b-4, which is used to document a proposed rule change with the SEC. These were submitted, in this case, by the exchange on which each proposed ETF would trade.

The Ark 21Shares Bitcoin ETF would trade on the Cboe BZX Exchange. Meanwhile, Nasdaq has filed 19b-4s on behalf of BlackRock and Valkyrie, and NYSE Arca has filed such documents for planned funds by Grayscale, Hashdex and Bitwise.

Seyffart noted that amendments to these 19b-4s could come Friday, such as updates regarding creation and redemption model specifics for the proposed ETFs.

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Various amendments to S-1s indicate that various issuers are going with cash creations and redemptions. This means authorized participants — tasked with creating and redeeming shares of an ETF — would exchange those shares for cash, rather than for a basket of securities reflecting the ETF holdings.

Other documents filed recently include 8-A forms, which are used to register securities. The latest to do so include Fidelity on Wednesday and Grayscale on Thursday.

“An issuer can register a security, but approved 19b-4 and effective S-1 still needed to be in place to launch an ETF/ETP,” Gabor Gurbacs, VanEck’s director of digital assets strategy, said in a Wednesday X post.

A source familiar with the spot bitcoin ETF filings told Blockworks the SEC could approve a 19b-4 and deem an S-1 form effective at different times.

An SEC spokesperson said the regulator does not comment on individual filings.

“Broadly speaking, if the commission declares a registration statement effective, that is reflected on EDGAR,” the representative told Blockworks in an email. “Any commission 19b-4 orders will be posted on our website and then published in the Federal Register.”

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