Commentators are specifically requested to provide their opinions on the vulnerability of the Bitcoin ETF to market manipulation.
The United States Securities and Exchange Commission (SEC) has outlined the next steps in evaluating the proposed Franklin Templeton and Hashdex spot Bitcoin exchange-traded fund (ETF) applications.
Observers speculate that the SEC’s actions may set the groundwork for potential approvals of spot Bitcoin ETFs in early January 2024, following earlier delayed decisions on applications from two potential issuers.
SEC Seeks Public Comments
A filing on November 28 reveals that the SEC has invited written comments on the proposals of Franklin Templeton and Hashdex regarding the approval or denial of their Forms 19b-4.
Form 19b-4, distinct from Form S-1, serves as a public disclosure sanctioned by the SEC’s Trading and Markets Division. In contrast, the Form S-1 is the offering prospectus subject to approval by the Corporate Finance Division. The SEC’s request provides a 35-day open period for comments and responses after publication in the Federal Register.
Regarding the Franklin Templeton application, commenters are requested to consider aspects such as potential price manipulation in the Bitcoin market, the company’s surveillance sharing agreement with Coinbase (which aids in price discovery and fraud detection), and the correlation between BTC spot and futures prices.
On the other hand, Hashdex’s proposed fund structure is more intricate, structured as a futures ETF holding spot BTC. Unlike Franklin Templeton, Hashdex plans to acquire BTC from other exchanges on the CME and relies solely on that mechanism for pricing. The SEC has sought input on the significance of CME’s size concerning the fund structure and the availability of sufficient liquidity.
Commenters are also asked about sponsor Toroso Investments’ calculations in determining the relationship between BTC prices on the CME and unregulated exchanges, as the sponsor manages and controls the fund.
SEC’s Early Update Sparks Speculation
The proposed rule changes facilitating the trading of these ETFs were submitted in late September, with the Hashdex ETF slated for trading on the New York Stock Exchange Arca and Franklin Templeton’s on Cboe BZX. Notably, the SEC extended its decision deadline for these applications to November 15, preceding the previously set January 1, 2024, deadline.
ETF expert James Seyffart suggests that this early update might signal the SEC’s alignment of applications preceding comprehensive approvals for all 12 issuers, including BlackRock and Grayscale.
While the likely approval date is projected for the first few weeks of January, these estimations are informed predictions based on SEC procedures and do not constitute a definitive timeline for decision-making.
Meanwhile, Bitcoin’s price was up 3% at the time of reporting, trading above $38,000. Bitcoin has seen three consecutive positive months, buoyed by bullish sentiment surrounding the potential approval of spot Bitcoin ETFs.