Bitcoin Spot ETF - When will be the Approval Date

In June 2023, a new round of Bitcoin spot ETF applications led by BlackRock caused the price of Bitcoin to surge by 20% within a week, skyrocketing from $25,000 to $30,000. Yesterday, Grayscale winning the lawsuit against the SEC led to a 5% rebound in Bitcoin's price within 24 hours, bouncing back from $26,000 to a high of $28,000. Once again, the market's confidence in Bitcoin spot ETFs' approval has been bolstered.

Now, let's delve into the current status of Bitcoin spot ETF applications and the crucial date they might receive approval.

Bitcoin Spot ETF Application Status

In June 2023, the asset management giant BlackRock submitted an application for the iShares Bitcoin Trust, initiating a new round of competition for Bitcoin Spot ETF applications. Encouraged by BlackRock's move, several investment/asset management institutions joined this competition. As of August 2023, a total of 8 institutions, including BlackRock, have submitted applications for Bitcoin Spot ETFs to the SEC.

According to the process outlined by the SEC for Bitcoin Spot ETF applications, the application response time will be calculated after the SEC publishes 19b-4 in the Federal Register.

The total response time for SEC's decision on a Bitcoin Spot ETF application is 240 days. During this period, there will be 3 rounds of public comments. The intervals between these comment periods are 45 days, 45 days, 90 days, and 60 days, respectively.

In other words, before the SEC issues a final decision (approval or rejection), they have the option to delay the decision three times during the comment periods. Additionally, the SEC retains the authority to approve or reject the application at any point during the resolution.

Below is the specific application process for a Bitcoin Spot ETF:

Taking BlackRock as an example, the SEC published the 19b-4 form for iShares Bitcoin Trust on July 19th in the Federal Register. Therefore, counting 45 days from July 19th leads to the deadline for the first comment period for iShares Bitcoin Trust, which is September 2nd. If the SEC decides to delay the resolution before this deadline, the next comment period will be extended by another 45 days. The final response date for iShares Bitcoin Trust, after 240 days, will be March 15th, 2024.

Below, we have listed the specific application information for these 8 institutions, including the project name, listing exchange, sponsor, trustee, custodian, application timeline, and historical application status.

BlackRock

ETF Name: iShares Bitcoin Trust

Exchange: Nasdaq

Sponsor: BlackRock Fund Advisors

Trustee: Delaware statutory trust

Bitcoin Custodian: Coinbase Custody Trust Company, LLC

Cash Custodian: Bank of New York Mellon

The combination of Bitcoin Custodian and Cash Custodian is collectively referred to as the Trustee.

Application Timeline:

• Nasdaq submitted the proposed rule change to the SEC on June 29, 2023.
• Notice publication date in the Federal Register: July 19th.
• First comment period deadline: September 2nd.

Historical Application Status: None

Fidelity

ETF Name: Wise Origin Bitcoin Trust

Exchange: Cboe BZX Sponsor: FD Funds Management LLC

Trustee: Delaware Trust Company

Administrator: Fidelity Service Company, Inc. (FSC)

Transfer Agent: Third-party organization (No further details)

Marketing Agent: Fidelity Distributors Corporation

Bitcoin Custodian: Fidelity Digital Assets Services, LLC (FDAS)

Application Timeline:

• Cboe BZX submitted the proposed rule change to the SEC on June 30, 2023.
• Notice publication date in the Federal Register: July 19th.
• First comment period deadline: September 2nd.

Historical Application Status:

Fidelity previously submitted a Bitcoin Spot ETF application in May 2021, which was rejected in February 2022.

Ark Invest

ETF Name: ARK 21Shares Bitcoin ETF

Exchange: Cboe BZX

Sponsor: 21Shares US LLC

Trustee: Delaware Trust Company

Cash Custodian (Transfer Agent): Bank of New York Mellon

Administrator: Bank of New York Mellon

Market Agenting: Foreside Global Services, LLC

Custodian: Coinbase Custody Trust Company, LLC

Assistant of Marketing: ARK Investment Management LLC

Application Timeline:

• Cboe BZX submitted the proposed rule change to the SEC on April 25, 2023.
• Notice publication date in the Federal Register: May 15th.
• First comment period deadline: June 29th (SEC decided to delay the decision).

Reason for delay: The Commission determined that additional time was needed to consider issues raised in the proposed rule change, thus extending the decision timeline.

Exchange submitted Amendment No. 2 on June 30th; Amendment No. 3 submitted on July 11th.

• Second comment period deadline: August 13th (SEC decided to delay the decision).

On August 11th, SEC released a notice soliciting comments on Amendment No. 3, further extending the decision timeline.

Historical Application Status:

Ark Invest previously submitted two BItcoin Spot ETF applications in 2021 and 2022, both of which were rejected.

Invesco

ETF Name: Invesco Galaxy Bitcoin ETF

The name "Galaxy" is derived from the ETF's tracking of the Bloomberg Galaxy Bitcoin Index.

Exchange: Cboe BZX

Sponsor: Invesco Capital Management LLC

Trustee: Delaware Trust Company

Custodian: Third-party custodian and qualified custodian in the United States (No further details)

Administrator: Established global fund manager (No further details)

Transfer Agent: Third-party institution (No further details)

Application Timeline:

• Cboe BZX submitted the proposed rule change to the SEC on June 30, 2023.
• Notice publication date in the Federal Register: July 19th.
• First comment period deadline: September 2nd.

Historical Application Status:

In 2021, Invesco and Galaxy jointly submitted a Bitcoin Spot ETF application, which was subsequently withdrawn in the same year.

WisdomTree

ETF Name: WisdomTree Bitcoin Trust

Exchange: Cboe BZX

Sponsor: WisdomTree Digital Commodity Services, LLC

Trustee: Delaware Trust Company

Administrator/Transfer Agent: U.S. Bank Global Fund Services

Custodian: U.S. Bank, National Association

Application Timeline:

• Cboe BZX submitted the proposed rule change to the SEC on June 30, 2023.
• Notice publication date in the Federal Register: July 19th.
• First comment period deadline: September 2nd.

Historical Application Status:

WisdomTree previously submitted two Bitcoin Spot ETF applications, one in March 2021 and the other in January 2022, both of which were rejected.

VanEck

ETF Name: VanEck Bitcoin Trust

Exchange: Cboe BZX

Sponsor: VanEck Digital Assets, LLC

Trustee: Delaware Trust Company

Administrator/Transfer Agent: The State Street Bank and Trust Company

Assistant of Marketing: Van Eck Securities Corporation

Bitcoin Custodian: Third-party qualified custodian (No further details)

Application Timeline:

• Cboe BZX submitted the proposed rule change to the SEC on June 30, 2023.
• Notice publication date in the Federal Register: July 19th.
• First comment period deadline: September 2nd.

Historical Application Status:

VanEck initially submitted a Bitcoin Spot ETF application in June 2018 and withdrew it in September 2019. Subsequently, VanEck submitted Bitcoin Spot ETF applications in March 2021 and June 2022, both of which were rejected.

Bitwise

ETF Name: Bitwise Bitcoin ETP Trust

Exchange: NYSE Arca

Sponsor: Bitwise Investment Advisers, LLC

Trustee: Delaware Trust Company

Cash Custodian (Transfer Agent): Third-party service provider (No further details)

Bitcoin Custodian: Third-party custodian (No further details)

Application Timeline:

• NYSE Arca submitted the proposed rule change to the SEC on June 28, 2023.
• Notice publication date in the Federal Register: July 18th.
• First comment period deadline: September 1st.

Historical Application Status:

Bitwise submitted a Bitcoin Spot ETF application in October 2021 and was rejected in June 2022.

Valkyrie

ETF Name: Valkyrie Bitcoin Fund

Exchange: Nasdaq

Sponsor: Valkyrie Digital Assets, LLC

Trustee: Delaware Trust Company

Bitcoin Custodian: Third-party qualified custodian (No further details)

Administrator/Transfer Agent: U.S. Bank Global Fund Services

Application Timeline:

• Nasdaq submitted the proposed rule change to the SEC on July 3, 2023.
• Notice publication date in the Federal Register: July 21st.
• First comment period deadline: September 4th.

Historical Application Status:

Valkyrie submitted a Bitcoin Spot ETF application in April 2021 and was rejected in December 2021.

All of the above information is from the SEC Federal Register.

Summary

• Ark Invest's ARK 21Shares Bitcoin ETF was the earliest submission in this round of Bitcoin spot ETF applications. It has undergone two comment periods, both of which were delayed. The remaining ETFs are all awaiting their first comment period, all in early September.
• Except for BlackRock, all other companies have prior experience with Bitcoin spot ETF applications. Among them, VanEck has the most extensive experience, having submitted three Bitcoin spot ETF applications since 2018.
• All 8 ETF applications included the previously mentioned common rejection reason from the 2021 applications: the lack of a Surveillance-Sharing Agreement (SSA).
• The proposed trading exchanges for the 8 ETFs are Nasdaq, Cboe BZX, and NYSE Arca. Among these, Cboe BZX is the most frequently proposed listed exchange, accounting for 5 out of 8 applications. This could be related to Cboe BZX's positive stance towards crypto assets and derivatives.
• The level of detail in the application documents varies slightly among the 8 ETFs. For instance, Valkyrie and VanEck did not provide detailed custodian information.

Can Bitcoin Spot ETF be Successfully Approved

This round of Bitcoin spot ETF applications has a high probability of being approved. The main reasons for this are the exceptionally high success rate of BlackRock's ETF applications and the inclusion of the Surveillance-Sharing Agreement (SSA).

• The Success Rate of BlackRock's ETF Application

BlackRock is renowned for its index-tracking fund products. Its flagship fund products (iShares) hold a market share of nearly 50% in the US ETF market. BlackRock has extensive successful experience in applying ETFs, with a success rate close to 100%, and the number of approvals is 575 out of 576 applications. The only failure was a jointly submitted actively managed ETF with Precidian Investments, and the reason for the rejection given by the SEC was the lack of transparency in profit.

• Surveillance-Sharing Agreement (SSA)

In this round of ETF applications, all 8 institutional applicants have included the Surveillance-Sharing Agreement (SSA) that was repeatedly mentioned in the reasons for the rejections of previous Bitcoin spot ETFs.

The Surveillance-Sharing Agreement (SSA) is an agreement between cryptocurrency exchanges and market regulatory bodies. This agreement allows both parties to share trading data and information for monitoring purposes. If suspicious trading data or information arises, it will be simultaneously shared with regulatory bodies, ETF issuers, and exchanges. The SSA is commonly used in cases involving financial products like ETFs. It can enhance the effectiveness of financial market monitoring, assisting regulatory bodies in detecting market manipulation, fraudulent activities, and other improper trading practices.

The inclusion of SSA in the current application documents is highly likely to prompt the SEC to relax its stance on fraud prevention and market manipulation concerns. At the very least, the SEC can not provide the same rejection reasons as it did in 2021.

Which ETFs can be successfully approved

Looking at the application dates, except for Ark Invest, these 8 institutions have all chosen to submit their applications to the SEC at almost the same time. It's hard not to suspect whether they have received some information earlier, believing that the SEC may approve the issuance of Bitcoin spot ETFs this year. Of course, we can not verify whether there is indeed such information. However, the attitude conveyed in this process is undoubtedly positive.

Meanwhile, since the reply dates are very close to each other, it is likely that multiple ETFs will be approved or delayed simultaneously. The proposed rule change documents for these ETFs are quite similar and all include the Surveillance-Sharing Agreement (SSA). Therefore, the SEC has no reason to reject one and approve another. In other words, if BlackRock's Bitcoin spot ETF is approved, then there is a high probability that the ETF applications submitted by other institutions will be approved as well.

Approval Time Prediction

Based on the previous approval process of Bitcoin spot ETFs, the probability of getting approved in the first or second reply is very low. The applications for Bitcoin spot ETFs earlier normally tend to take the full 240 days before a decision is made, and then the decision is often a rejection. While the SEC cannot use the same reasons to reject spot ETF applications this time, considering its consistent stance towards the crypto market, it is likely to search for other reasons to delay the application responses. Ultimately, the decision might be made close to the final reply date.

On the other hand, the choice of the Bitcoin custodian within the ETF might also be a crucial factor influencing the SEC's decision. For a Bitcoin spot ETF, the custodian needs both significant influence and experience in the crypto field, as well as recognition by the SEC (to act as a trading regulator). For instance, BlackRock explicitly stated in their ETF application that they would use Coinbase as the Bitcoin custodian. However, Coinbase's previous legal disputes with the SEC might influence the final decision of the application to some extent. While these legal disputes are not directly related to Bitcoin, they could result in delays in the approval process.

Therefore, we predict that the most likely time for this round of Bitcoin spot ETFs to be approved will occur 240 days after the announcement of the 19b-4 published in the Federal Register, which is the Final Reply Date.

Based on the publication date of the 19b-4 documents for each ETF application in the Federal Register, the potential approval times for the 8 institutional ETFs are as follows: