SEC Could Prepare Fresh Reasons to Deny Bitcoin ETFs, Says Bloomberg Analyst

The U.S. Securities and Exchange Commission (SEC) is looking for new ways to justify its continued rejection of spot Bitcoin exchange-traded funds (ETFs), according to Elliott Z. Stein, a litigation analyst at Bloomberg Intelligence.

SEC’s Stance Over the Years

Traditionally, the SEC has cited concerns about the susceptibility of an unregulated crypto market to manipulation as the foundation for its rejections. However, the recent victory by Grayscale may have increased the chances of the “SEC finally approving one or more spot Bitcoin ETF applications.” It’s important to note that the federal judge did not compel the SEC to approve a spot Bitcoin ETF but rather urged the regulator to reevaluate its reasons for rejecting Grayscale.

Considering these developments, Stein raises a cautionary flag, expressing apprehension that the SEC’s pivot toward new grounds for denial, such as custody-related issues, could inadvertently invite additional legal challenges.

Read More: Bitcoin ETF Approval: SEC’s Position Weakens, 75% Chance in 2023

Gensler Must Decide

Gary Gensler, leading the SEC, now faces crucial decisions amidst ongoing legal battles surrounding Bitcoin ETFs. The implications are substantial, not only for cryptocurrencies but also for the financial sector at large.

Options on the Table

The SEC has several options at hand:

1. Contesting the Court Decision: One option is to challenge the recent court ruling. However, certain aspects of the ruling make this choice less appealing.
2. Approving Pending Applications: The SEC can also approve one or more of the nine pending spot Bitcoin ETF applications, including submissions from major industry players like Ark, Bitwise, and BlackRock. The regulator operates under a strict deadline, with the first decision due by January 10, 2024.
3. Seeking New Denial Grounds: Alternatively, the SEC may seek fresh reasons to reject Bitcoin ETFs, though this could lead to further legal disputes.

The SEC’s new search for justification could be seen as a sign that it is still not convinced about the safety of spot Bitcoin ETFs. However, it could also be a way for the regulator to buy itself more time to make a decision.

Only time will tell what the SEC will ultimately decide. But in the meantime, the cryptocurrency market is watching closely.