The debate over Bitcoin Exchange Traded Funds (ETFs) has reached a climax, with major politicians now stepping in to address the issue. The Securities and Exchange Commission’s (SEC) persistent opposition to ETFs has been criticized by politicians, who have urged the agency to accept the applications.
The United States Congress has issued a formal letter dated September 26, 2023, to the Chair of the Securities and Exchange Commission, Gary Gensler, encouraging him to swiftly accept Bitcoin ETF applications in light of a major court decision.
Members of the US Congress advocate for a Bitcoin ETF
Members of the US House Financial Services Committee sent letters to the SEC requesting that the spot Bitcoin ETF filings be approved “immediately” in a letter dated September 26. The letter, co-signed by Reps. Mike Flood, Wiley Nickel, Tom Emmer, and Richie Torres, question the regulatory body’s stance on ETFs.
An authorized spot Bitcoin ETF would safeguard investors by making access to BTC safer and more transparent. Furthermore, the senators chastised the SEC for its opposition to such ETFs. According to the Representatives, the Court of Appeals determined that, in the lack of a convincing explanation, this regulatory treatment of identical items is illegal.
The letter pushed the SEC to accept the listing of spot Bitcoin ETFs, citing the SEC’s “inconsistent and discriminatory” rules for denying spot ETFs.
What does the Letter say?
The letter references the order issued by the United States Court of Appeals for the District of Columbia in the case of Grayscale Invs., LLC v. SEC. The Court of Appeal determined that Grayscale’s anticipated Bitcoin ETP is similar, across relevant regulatory issues, to the permitted Bitcoin futures ETPs in its order.
It also notes how the Circuit Court agreed with Grayscale that the SEC’s decision to deny Grayscale’s petition to convert Grayscale Bitcoin Trust (GBTC) to spot Bitcoin ETP breached the Administrative Procedures Act.
Encouragement to Approve
ETFs are meant for easy trading through brokerage accounts, approving a Bitcoin ETF might make it considerably easier for investors to enter the cryptocurrency market. Rep. Tom Emmer, the majority whip in the House, as well as Reps. Mike Flood and Ritchie Torres, members of the Congressional Blockchain Caucus in the House, are among those pressing for this reform.
The letter indicates unequivocally that there are no justifiable justifications for the SEC‘s postponement, and that rejecting clearance is discriminatory and contradictory.
Furthermore, the SEC’s reluctance looks increasingly inconsistent, with major firms such as BlackRock and Fidelity in line for certifications. Furthermore, this week’s House Financial Services Committee hearing provides an opportunity for these issues to be addressed directly to Gensler.
The SEC’s unequal handling of spot bitcoin ETFs and similar funds based on futures contracts, which the commission has approved, was directly addressed by the court.
“The Court’s decision emphasizes the fundamental point, the legislators stated. A spot bitcoin ETP is identical to a bitcoin futures ETP. As a result, the SEC’s existing position is untenable in the future.”
According to an SEC representative, Gensler will answer directly to members of Congress rather than through the media.
Although the SEC has not yet approved a spot Bitcoin ETF, major firms such as BlackRock and Fidelity have put forth proposals for funds in recent months.
SEC’s Investigation into Chinese Cryptocurrency Firms
Separately, Rep. Blaine Luetkemeyer, R-Mo., wrote to Gensler and Financial Industry Regulatory Authority President Robert Cook on 25 September, expressing caution that both agencies permit authorized broker-dealers with links to the Chinese Community Party to carry out business in the United States.
Luetkemeyer stated that the advice was too specific and unnecessary to address worries regarding non-China-based US enterprises with CCP links, naming broker-dealers such as Prometheum Inc., Webull Financial, LLC, and Moomoo, Inc.
“The SEC’s lack of activity in this matter is especially concerning given the significant function that enrolled broker-dealers perform in our financial markets, which includes its recognition that many of these companies offer (or are planning to supply) products and services exclusively for retail investors, that necessitate the gathering of significant quantities of customers’ data,” said the legislator.
Luetkemeyer questioned Gensler on the agency’s data security issues with links to the CCP, among other things. Cook and Gensler have until October 26 to react.
FINRA, the SEC, Moomoo, Webull, and Prometheum did not reply promptly to requests for comment.
Surprisingly, not long after the letter was discovered, another surprise occurred. The SEC delayed its ruling on Ark Invest’s 21 Shares spot Bitcoin ETF. The Bitcoin ETF, established in partnership with Cathie Wood’s Ark Invest and 21 Shares, was scheduled to get its order on September 29; nevertheless, the SEC issued its decision nearly three days early.
Under current SEC standards, the regulatory agency has been sluggish in approving these ETFs. The decision for this ETF will most likely be made in November.