Bitwise Asset Management has submitted an updated application for a Bitcoin exchange-traded fund (ETF) to the SEC, addressing the regulator's concerns with 40 pages of additional material. However, a Bitwise executive cautioned that even this may not be sufficient to meet regulatory standards.
Bitwise is among six financial companies seeking approval for a Bitcoin spot ETF. The SEC had paused the ETF application, delaying its consideration. Previously, the agency's rejection of Grayscale Investments' bid to transform its Grayscale Bitcoin Trust into a listed Bitcoin ETF was overturned by the court.
Matt Hougan, Chief Investment Officer at Bitwise, stated in a blog post that the firm must once again demonstrate that the CME Bitcoin futures market leads in price discovery over the spot market. This would allow it to be monitored as a "larger regulated market."
CME Group, based in Chicago, operates derivative exchanges, including those for Bitcoin futures and options.
In the revised filing, Bitwise discusses the "mixed" or "uncertain" academic research highlighted by the SEC regarding the lead-lag relationship between Bitcoin futures and spot markets. Bitwise cited various academic studies, asserting that "the data convincingly shows that CME is the primary source of price discovery." Hougan argued that the revised application demonstrates that "every well-designed academic study supports CME's 'significant' findings," countering several of the SEC's arguments from its prior denial.
These findings are crucial for meeting SEC requirements. The SEC has mandated that listed exchanges must establish surveillance-sharing agreements with "larger" regulated markets, such as CME's Bitcoin futures market, if they cannot determine that other means are adequate to prevent fraudulent and manipulative practices. The SEC had determined that previous applicants failed to meet this requirement.
However, Hougan cautioned that while regulatory sharing agreements with spot exchanges are positive, they might not satisfy the technical regulatory criteria.
