BlackRock, then Bitwise — How the spot bitcoin ETF filings differ

One day after BlackRock made a splash last week by putting forward a plan to launch a spot bitcoin ETF, crypto-focused asset manager Bitwise re-upped its own similar bid.

The filings are the latest of their kind in a decade-long saga as the SEC has never allowed a spot bitcoin ETF to hit the US market — despite efforts from the Winklevoss twins, Fidelity and a slew of other would-be issuers.

But the latest proposed products by BlackRock and Bitwise are a bit different from one another.

Bitwise filed for a spot bitcoin ETF in October 2021 — a proposal ultimately rejected by the SEC in June 2022.

The Friday filing by NYSE Arca — the would-be listing exchange for the Bitwise product — added more legal analysis around the surveillance of bitcoin via the Chicago Mercantile Exchange (CME) futures markets, according to Bryan Armour, director of passive strategies research at Morningstar.

“The timing of the filing seems likely to jump in the queue behind BlackRock should the SEC approve the first spot Bitcoin ETF,” Armour told Blockworks.

Bitwise Chief Investment Officer Matt Hougan told Blockworks in April that while a spot bitcoin ETF would be “wonderful” for investors in the long term, the firm would likely wait for more regulatory clarity before pursuing another.

A Bitwise spokesperson on Tuesday confirmed the firm’s bid but declined to comment.

Sumit Roy, a senior analyst at ETF.com, said Bitwise’s move is “pretty clearly a direct response to the BlackRock filing.”

BlackRock takes new step

“Bitwise has emphasized in the past the idea that prices for bitcoin futures on the CME lead spot bitcoin prices, and therefore, having a surveillance-sharing agreement with the CME should satisfy the SEC’s requirements,” Roy said. “It did so again in this filing but with even more data to back up its case.”

Both the Nasdaq and NYSE filings — related to the BlackRock and Bitwise proposals, respectively — cite the SEC’s approval of a bitcoin futures fund by firm Teucrium.

That ruling noted that the CME “comprehensively surveils futures market conditions and price movements on a real time and ongoing basis in order to detect and prevent price distortions, including price distortions caused by manipulative efforts.”

In BlackRock’s case, the listing exchange is willing to enter into a surveillance-sharing agreement with “an operator of a US-based spot trading platform for bitcoin,” the document states.

This would supplement its surveillance-sharing agreement with the CME.

“Is that enough to get this ETF over the finish line?” Roy said. “Ordinarily, I would argue no, especially since the spot trading platform in question — if it’s Coinbase — is being sued by the SEC for operating as an unregistered exchange.

“But because BlackRock is involved, there is hope that they have the inside scoop and will get this done,” he said. “Throw in the impending Grayscale verdict and things are getting pretty complicated.”

A decision in Grayscale Investments’ case against the SEC — launched after the regulator blocked the company’s proposed conversion of its bitcoin trust (GBTC) to an ETF — is expected in the coming months.

In the wake of the BlackRock and Bitwise filings, GBTC is up 30% in the last five days, and up roughly 14% on the day.

Industry watchers say they expect more to re-join the spot bitcoin ETF race. Though eyes have been on Fidelity — another TradFi giant that previously sought to launch a spot bitcoin ETF — the fund titan has not yet re-filed for such a fund.

A Fidelity spokesperson declined to comment.

Ark Invest and 21Shares re-filed for their spot bitcoin ETF in April. Other hopeful issuers such as VanEck, Valkyrie, WisdomTree, Global X and Invesco could do the same, Bloomberg Intelligence analysts said last week.

“There tend to be clusters of filings as issuers take a new approach or see increasing odds of acceptance by the SEC,” Armour said. “It’s critical to be among the initial ETFs on the market, so I would be surprised if more didn’t follow suit.”

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