Bernstein Research: Favorable Chance of U.S. Approval for Spot Bitcoin ETF, Says Report

In a recent research report, brokerage firm Bernstein stated that the U.S. Securities and Exchange Commission (SEC) faces a challenging position regarding spot bitcoin exchange-traded funds (ETFs), but the likelihood of approval is relatively high.

The SEC has already permitted futures-based bitcoin ETFs and recently gave the green light to leverage-based futures ETFs, as they rely on regulated exchanges like the CME for pricing.

According to analysts led by Gautam Chhugani, the SEC believes that a spot bitcoin ETF may not be reliable due to the lack of regulatory oversight on spot exchanges such as Coinbase, raising concerns about price manipulation.

Despite receiving multiple applications, the regulator has not yet approved a spot bitcoin ETF. Blackrock’s subsidiary recently filed for the establishment of a spot bitcoin ETF, prompting other asset managers like Invesco and Wisdom Tree to apply or reapply for similar products.

The report also highlighted Grayscale’s attempt to convert its Grayscale Bitcoin Trust (GBTC) into an ETF, which is currently being reviewed by an appeals court.

“The court did not sound convinced that the futures price is not derived from the spot price, and thus to allow a futures-based ETF and not allow spot sounds like a difficult pill to swallow for the courts,” the analysts noted.

Additionally, the industry has proposed a surveillance agreement between spot exchanges and regulated exchanges like Nasdaq.

The absence of a bitcoin spot ETF has led to the growth of over-the-counter products like the Grayscale Bitcoin Trust (GBTC), which are costlier, less liquid, and less efficient, according to the brokerage firm.

The report suggests that the SEC would prefer to approve a regulated bitcoin ETF involving mainstream Wall Street participants with surveillance from established regulated exchanges, rather than relying on Grayscale’s OTC product to serve institutional demand.

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