The crypto community is closely monitoring the likelihood of the U.S. Securities and Exchange Commission (SEC) approving a spot Bitcoin Exchange-Traded Fund (ETF) in 2023, even as more institutions continue to apply for the product.
In a recent interview with prominent crypto media journalist Andrew Throuvalass, pro-Bitcoin lawyer Joe Carlasare shared his expert insights on the matter, projecting the likelihood of approval to be in the range of 30% to 40%. Carlasare highlighted two of the most prominent institutions to apply for a Bitcoin spot ETF in his analysis, including BlackRock and Grayscale.
BlackRock, a leading investment management corporation, recently confirmed its collaboration with Coinbase, the largest spot Bitcoin exchange in the United States, in its renewed application for a Bitcoin spot ETF. However, despite Coinbase’s prominence, Carlasare raised concerns that the SEC may question whether it represents a “sufficient size” market for establishing an ETF.
Given that a significant portion of spot trading volume occurs outside the U.S., the collaboration with Coinbase may not meet the SEC’s requirements.
“Sufficient size is somewhat ambiguous, but they have said it has to be a market large enough so that a person or firm attempting to manipulate the Bitcoin spot market would need to necessarily trade on that platform,” said the Illinois-based lawyer.
Carlasare then highlighted the lawsuit filed in 2022 by Grayscale against the SEC over the denial of an application to convert Grayscale’s Bitcoin Trust to an ETF. He emphasized that even if Grayscale wins its ongoing lawsuit, it does not guarantee the conversion into a spot ETF.
“A ‘win’ may just mean the court of appeals directs the SEC to revisit their decision,” he said, adding, however, that while a favourable outcome in the lawsuit could prompt the SEC to reconsider, the ultimate approval of a spot ETF remains uncertain.
Carlasare’s predictions come just days after Eric Balchunas, Bloomberg’s senior ETF strategist, estimated a 50% probability of BlackRock’s spot Bitcoin ETF receiving approval from the SEC primarily due to the increased likelihood of Grayscale prevailing in their ongoing lawsuit against the SEC.
Elsewhere, Brokerage firm Bernstein released a report on Monday indicating a “relatively high” probability of approval for a Bitcoin spot ETF. According to the report, the SEC could approve the product based on its prior approval of futures-based Bitcoin ETFs and leverage-based futures ETFs. However, it emphasized that the SEC may demand regulatory oversight of spot ETFs from exchanges within its purview, such as the CME, rather than Coinbase.
SEC’s cautious approach to cryptocurrencies stems from concerns about market manipulation, investor protection, and the overall stability of the cryptocurrency market. As a result, it has denied several Bitcoin ETF applications in the past due to what it perceives as insufficient information and inadequate safeguards. Nevertheless, industry players have been fighting back, with firms like BlackRock, Invesco and Wisdom Tree reapplying for the product.
