SEC Denies Fidelity’s Bitcoin Spot ETF

Brooks Butler

Jan. 27, 2022

The SEC has continued its long-standing practice of denying approval to Bitcoin-based spot ETFs.

Shutterstock cover by Andriy Blokhin

Key Takeaways

The SEC denied Fidelity’s Bitcoin Spot ETF proposal today.
The Commission cited concerns over fraud, market manipulation, and the lack of investor protection.
Other institutions are taking a different approach to Bitcoin ETFs, as the SEC has shown no signs of approving a spot fund anytime soon.

The Securities and Exchange Commission has rejected Fidelity’s Wise Origin Bitcoin Trust, a Bitcoin-based spot ETF. The SEC approved various Bitcoin futures ETFs last year, but the spot ETF has remained elusive.

Bitcoin Spot ETF Denied—Again

The SEC has continued its long-standing practice of denying approval for Bitcoin spot ETFs.

The regulatory body has not approved the necessary rule change that would allow Fidelity to list its Wise Origin Bitcoin Trust. The investment giant’s ETF had support from the Chicago Board Options Exchange’s BZX Exchange, and it filed with the SEC on May 10 last year.

The SEC extended the deadline by which would approve, deny, or further delay on the Fidelity decision in July and again in November.

It was denied today, the Commission wrote, because BZX failed to meet its burden of demonstrating that fraud and manipulation could be sufficiently prevented, as per the Exchange Act and the Commission’s Rules of Practice. Moreover, the SEC remained unconvinced that the Exchange had not taken sufficient measures that might protect investors and “the public interest.” Similar concerns were cited by the Commission in its past denials.

While the SEC did approve several Bitcoin Futures ETFs last year, which do not actually track underlying price of Bitcoin, to which there was great exuberance, as evidenced by one nearing trading records upon its debut. However, the SEC denied multiple spot ETFs last year, and postponed many others.

There are still Bitcoin spot ETF applications pending, with two slated to be decided upon next month. However, it seems more likely that another kind of cryptocurrency-related ETF might have approval success, and that is what Valkyrie seems to have banked on, applying yesterday to the SEC for an ETF focused on companies related to Bitcoin mining.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.

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