These Are the High-Profile Spot Bitcoin ETF Applications Currently in Play (PART - 2)

Failed Bitcoin ETF applications

There’s a long list of failed spot Bitcoin ETF applications; to date, the SEC has rejected every single one that’s crossed its desk. These are all the applications that have been rejected to date:

1. Kryptoin

Delaware-based Kryptoin made its first attempt at filing for a Bitcoin ETF in October 2019, with the proposed Kryptoin Bitcoin ETF Trust to be listed on NYSE Arca. The financial services company made a second stab at a Bitcoin ETF in April 2021, with the revised proposal for the Trust to be listed on Cboe’s BZX Exchange. Its amended filing listed the service providers that would assist in launching its ETF, including crypto exchange Gemini, which would provide custody for the Trust's Bitcoin holdings.
By the end of that month, the application was officially under review by the SEC, which subsequently delayed its decision on the filing to July 27, 2021. “The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the comments received,” reads the June 9 announcement from the Securities and Exchange Commission (SEC).

SEC Pushes Deadlines on Four Bitcoin ETF Applications to Late 2021

The U.S. Securities and Exchange Commission has pushed back the deadlines for four Bitcoin ETF (exchange-traded fund) applications to late 2021.  They include applications for the Valkyrie XBTO Bitcoin Futures Fund (extended to December 8), the Kryptoin Bitcoin ETF (December 24), the WisdomTree Bitcoin Trust (December 11), and the Global X Bitcoin Trust (November 21). They are among at least a dozen outstanding Bitcoin ETF applications on the SEC's desk, filed by various high-profile companies....
In September 2021, the SEC once again pushed back the deadline for its decision on the Kryptoin Bitcoin ETF Trust, with a revised date of December 24, 2021. On this occasion, the SEC's announcement highlighted the need for more time "to consider the proposed rule change and the issues raised in the comment letters that have been submitted in connection therewith."
The SEC rejected Kryptoin’s application around the same time as Valkyrie’s, at the end of 2021.

2. First Trust/SkyBridge

In March 2021, hedge fund SkyBridge Capital submitted its filing for a Bitcoin ETF with the SEC. The firm, run by former White House communications director Anthony Scaramucci, already runs a Bitcoin Fund open to accredited investors with a minimum investment of $50,000; within weeks of its opening in January 2021, it grew to over $370 million.
That same month, Scaramucci was optimistic that a Bitcoin ETF could be approved by the end of 2021, telling Decrypt, "I'm hoping that with the introduction of Gary Gensler now into the regulatory rubric, and my understanding of where he's coming from, although I don't know it personally, is that possibly we can get an ETF in place by the end of the year."

In May 2021, NYSE Arca submitted an application for a proposed rule change that would see SkyBridge Capital’s Bitcoin ETF listed on the exchange. That July, the SEC pushed back the review period for the Skybridge Bitcoin ETF before finally rejecting it in January 2022.

3. One River

One River wheeled out the big guns in its bid to win over the SEC, bringing on former SEC Chair Jay Clayton as an adviser. Clayton, who joined the firm prior to its Bitcoin ETF application, headed the SEC during a period when it rejected every application for a Bitcoin ETF.
You can probably guess what happened in May 2022...

4. Galaxy Digital

In April 2021, crypto investment firm Galaxy Digital filed for a Bitcoin ETF; at the time, the eighth such application to land on the SEC's desk. The proposed Galaxy Bitcoin ETF would be listed on the NYSE Arca. Galaxy Digital, which manages over $2.5 billion in assets, is also one of the largest institutional holders of Bitcoin, with 16,400 BTC in its treasury (worth nearly $500 million at current prices).
Billionaire Galaxy Digital founder Mike Novogratz weighed in on the SEC's reluctance to approve a Bitcoin ETF at the 2021 Ethereal Summit, arguing that under the Trump administration the SEC had instead allowed the Grayscale Bitcoin Trust (GBTC) to flourish, which was "not as good for the consumer." GBTC, Novogratz argued, saw the consumer "buying Bitcoin at a 20-30% premium being arbitraged by hedge funds into a closed-end fund—where an ETF would have been a much more elegant solution."
Like every other ETF proposal, nothing came of Galaxy Digital’s solo application—but later, in September 2021, the firm applied with Invesco for a joint ETF, as mentioned above. They then started a fresh application together after BlackRock filed its own in mid-2023. Invesco's application was added to the SEC's official calendar in mid-July 2023, entering a three-week comment period.

A long and winding road

The road toward a Bitcoin ETF has been a long one. Since the Winklevoss twins first filed for a Bitcoin ETF-like trust in 2013, the SEC has dragged its feet over the idea. It has repeatedly delayed making decisions on multiple Bitcoin ETFs over the last few years, causing firms like VanEck to pull their applications over fears the SEC would reject them.
The SEC’s main concerns about approving a Bitcoin ETF relate to the lack of transparency of trading information, market manipulation, and the notion that Bitcoin is fundamentally different from other assets it regularly deals with (for example, what happens in the case of a hard fork?). It is also worried about a lack of liquidity in the markets.

What Would it Take for the SEC to Approve a Bitcoin ETF?

[CORRECTION: A previous version of this story incorrectly stated that Bitcoin ETF applications from Kryptoin and the USCF Crescent Crypto Index Fund are currently "under consideration" by the SEC. While applications have previously been filed, they are incomplete pending further amendments] A US-approved Bitcoin ETF would be a wondrous thing, say many in the cryptocurrency industry. Were it to happen, confidence in the world’s premier cryptocurrency would skyrocket; institutional and retail inv...

In conversation with Decrypt, Sui Chung, CEO of crypto indices provider CF Benchmarks, pointed out that in the early days, those filing for Bitcoin ETFs—such as the Winklevoss twins—were doing so from startups, albeit well-funded ones. But now the filings are coming from a new breed of applicants that are ready to meet these challenges.

"I think a lot of the areas that the SEC has previously voiced concerns around, filers [didn’t have] a lot of experience in the ETF market, particularly with the vagaries of the crypto markets and how they would sync up with equity markets through the ETF structure,” he said. He added that if constructed in the right way, a Bitcoin ETF need not be different from any other ETF listed on the stock exchange.
In August 2021, SEC chair Gary Gensler weighed in, noting that he "particularly looked forward to" the SEC’s review of “ETFs limited to these CME-traded Bitcoin futures." His hint that the SEC is more favorably inclined towards Bitcoin futures ETFs than ETFs with physical exposure to Bitcoin sparked a rush of applications for Bitcoin futures ETFs, with the likes of Galaxy Digital and VanEck filing proposals.
Gensler again indicated his interest in Bitcoin futures ETFs in prepared remarks for the Financial Times "Future of Asset Management North America" conference, in September 2021. Gensler stated that earlier in the year, "a number of open-end mutual funds launched that invested in Chicago Mercantile Exchange (CME)-traded bitcoin futures."

First Bitcoin Futures ETF Trades Nearly $1 Billion in One Day

The first U.S. Bitcoin futures ETF launched today, and eager investors traded $280 million-worth of shares in just the first 20 minutes. By the time the market closed on Tuesday, nearly $1 billion in shares changed hands. ProShares’ Bitcoin Strategy ETF began trading today on the New York Stock Exchange under the ticker BITO after receiving approval from the U.S. Securities and Exchange Commission on Friday. Investors wanting exposure to the biggest cryptocurrency were able to buy shares tied t...
The SEC chair noted that the regulator has seen a number of filings for Bitcoin futures ETFs under the Investments Company Act of 1940, the so-called "'40 Act". "When combined with the other federal securities laws, the ’40 Act provides significant investor protections for mutual funds and ETFs," Gensler said, adding, "I look forward to staff’s review of such filings."
In October 2021, the long-drawn-out process finally reached its conclusion, with the first Bitcoin futures ETF debuting on the New York Stock Exchange. The ProShares BTC futures ETF nearly broke the trading record for any debuting ETF, trading almost $1 billion in its first day. The launch of ProShares' ETF could open the floodgates for further Bitcoin futures ETF applications, though at least one contender has abandoned its plans; Invesco pulled the plug on its ETF application mere hours before the ProShares Bitcoin futures ETF launched.

Bitcoin ETFs around the world

While the U.S. has dragged its heels, other countries have pressed ahead. There are now multiple Bitcoin ETFs operating in countries such as Canada and Brazil, with Europe's first Bitcoin ETF going live in August 2023. And there are a number of exchange-traded notes (ETNs) in Europe, which are very similar financial instruments.

Analysts Increase Odds of Bitcoin ETF Approval This Year to 75%

Grayscale’s court win yesterday has added optimism for a Bitcoin ETF this year. Bloomberg’s ETF experts Eric Balchunas and James Seyffart now give a 75% chance of approval by the end of the year. This morning, the duo upped the odds of an approval in 2023 from 65% at the start of August. Lot of people were asking yesterday. Eric and I have moved to 75% for 2023 launch of a spot #Bitcoin ETF and we think it’s almost a done deal that we will have one launched by the end of 2024. https://t.co/nO1g...

Despite numerous rejections and delays, the crypto industry remains optimistic about the prospects of a spot Bitcoin ETF in the U.S.
BlackRock’s June 2023 application, followed by Grayscale's August 2023 victory in court against the SEC, reignited hopes; Bloomberg analysts now put the odds of a spot Bitcoin ETF being approved by January 10, 2024 at 90%, a view echoed by JPMorgan.

That optimism is fueled by a looming window in January 2024 during which the SEC could approve multiple applications simultaneously, though a previous window in November 2023 passed without incident, with the SEC delaying approval on several applications. Of course, there’s still no guarantee that the SEC will approve a spot Bitcoin ETF during that window.
In a sign that the stars may be aligning for a spot Bitcoin ETF approval, Google tweaked its rules around crypto advertising to allow for the promotion of “cryptocurrency coin trusts” in December. And just before Christmas, the SEC met with at least seven Bitcoin ETF hopefuls, instructing them to submit final changes before December 29, 2023.
Speaking to Decrypt in November 2023, Coinbase CEO Brian Armstrong said he was “pretty optimistic” that an ETF would be approved in 2024, while stressing that he didn’t have “proprietary or inside knowledge” on the matter. Earlier that month, Coinbase’s COO Emilie Choi said that it was “ready to hit the ground running,” on approval of an ETF, noting that custody fees would open up a new revenue stream for the exchange.
“One stat that I find really powerful is that 52 million Americans own crypto today despite the current regulatory overhang,” Choi said. “So, imagine what will happen once ETFs are introduced and widely available.”