- The SEC recently called applications for spot bitcoin ETFs “inadequate”
- The lack of a spot ETF leads to the rise of alternative OTC products
- They are too costly, illiquid and less efficient
A short time ago, brokerage firm Bernstein published a report indicating that there is a fairly high probability of spot ETF approval by regulators. Analysts noted that the SEC has already approved futures ETFs because pricing occurs on a regulated CME exchange.
But the agency has expressed some skepticism about spot bitcoin ETFs because “spot exchanges like Coinbase” are not subject to regulation and so prices become unreliable and vulnerable to manipulation.
Bernstein analyst Gautam Chhugani said:
“The court found no compelling evidence that the futures price is directly dependent on the spot price. So, banning spot ETFs could prove difficult.”
The report also highlights Grayscale’s attempt to turn its Grayscale Bitcoin Trust (GBTC) fund into an ETF, which is now before the appeals court. In addition, the industry is also actively discussing a supervisory agreement between a spot exchange operator and a regulated exchange such as Nasdaq.
The report concludes by noting that the SEC is leaning more toward introducing a regulated bitcoin-ETF aimed at major Wall Street participants, with oversight provided by regulated exchanges. This approach is seen as more appropriate than using over-the-counter products, such as GBTC, to meet the growing institutional demand for BTC investments.