The U.S. Securities and Exchange Commission (SEC) has delivered another massive blow to the crypto community by declining nine BTC ETF applications from three different companies. The decision came right before the August 23rd deadline for the decision on two ProShares BTC ETFs. Unfortunately, along with the ProShares decision came seven more blows, this time aimed at Direxeon and Granite Shares. Direxeon was due to hear about its five BTC ETF applications by September 23rd, but it appears that the SEC didn’t want to beat around the bush and waste time.
Interestingly, the crypto markets haven’t reacted too badly to the news when compared with the last decision to stall an announcement of a BTC ETF. This could indicate that institutional investors have found another route to gain exposure to BTC.
Back to the Drawing Board
It is time for the three companies to head back to the drawing board in order to shore up their BTC ETFs, addressing the list of issues the SEC detailed as reasons for declining the applications. The most common reason coming from the SEC in the past few months – including the latest round of bad news – is that the exchanges don’t do enough to prevent outside market manipulation. When you consider that cryptocurrencies are decentralized, there is no real way to prevent market manipulation, as exchanges are largely unregulated.
Institutional Investors will Have to Wait
The SEC’s decision comes as bad news for institutional investors who so desperately want to be able to offer BTC action to their clients. In addition to institutional investors, a large portion of the American market doesn’t feel comfortable with signing up and sending money to a crypto exchange – meaning that a BTC ETF is needed now more than ever. Fortunately, the owner of the New York Stock Exchange – Jeff Sprecher – and his wife have teamed up with a range of companies to create a centralized exchange, which is essentially a new layer to be added to the Bitcoin network.
Once Bakkt gains US Commodity Futures Trading Commission approval it will work similarly to the Lightning Network crossed with a digital Fort Knox. It will be an off-chain digital marketplace where investors can gain access to BTC via traditional methods, opening the doors to giant pools of institutional money.
Other Avenues Available
For those institutional investors that don’t want to wait for the SEC to accept a BTC ETF or Bakkt to open its doors, there are plenty of other options available. American investors can now get their hands on a BTC ETN from Sweden. It has been operational since 2015 and has been a popular choice for European investors. Unfortunately, until recently the XBT Provider AB Bitcoin ETN was only denominated in Swedish Krona or Euros, meaning American money had no way of flowing into it. Last week, the company behind it released a USD denominated version of the ETN, meaning American institutional money can begin to flow into BTC markets. If investors would prefer to get involved on the mining side of things, Hut8 is possibly the largest publicly traded crypto mining firm and it gives its investors the chance to gain exposure to the BTC markets through its state-of-the-art crypto mining facilities.
While this doesn’t completely solve the issue of America not having its own regulated BTC ETF, these are the only other options available at this time. The SEC has another decision due in September, this time it is between VanEck and SolidX, but given the state of the proposal, there is a good chance it will also be declined with similar reasons to the latest batch. We have our fingers crossed that the SEC gives this BTC ETF the green light, as crypto markets are hurting badly from the negative decisions.