Applicants for a spot Bitcoin ETF have a good chance of approval if they can prove that it is a more efficient and effective way for investors to buy the digital asset, the former SEC chairman Jay Clayton said.
«If [the companies] are right that the spot equity market has similar efficiency to the futures market, it will be hard to resist approving the instrument», — the official added.
Clayton warned that the process will not be quick, noting the need for thorough regulation. However, he acknowledged “impressive successes” achieved by the crypto industry, particularly in the context of institutional investment.
The former chairman led the agency from 2017 to 2020. During that period the Commission rejected several requests for a spot Bitcoin ETF and filed a lawsuit against Ripple Labs.
According to Clayton, in the past the regulator did not approve an ETF based on the first cryptocurrency due to a lack of transparency and concerns about investor protection.
«When the SEC approved a futures-based ETF, officials said: ‘Let\’s look at the futures market: we see oversight, we see investor protection that is sufficient.’ But they did not see the same in the spot market», — Clayton explained.
On June 15, BlackRock filed with the SEC an application for a spot Bitcoin ETF. Following the financial giant, similar filings came from Valkyrie, Fidelity Investments, WisdomTree and Invesco. In the queue ARK Invest and 21Shares have priority based on the time of filing.
On June 30, WSJ sources said that the Commission rejected the filings because they did not contain sufficient information regarding the so-called joint oversight agreement or details of this mechanism. The latter became a key addition to BlackRock’s filing.
Subsequently, the aforementioned companies promptly sent the agency updated proposals.
As Bernstein analysts note, the regulator will not be able to maintain its negative stance toward spot ETFs based on the first cryptocurrency for long.
Circle CEO Jeremy Allaire predicted that the recent wave of applications to launch Bitcoin-based exchange-traded funds would lead to SEC approval.