Securities and Exchange Commission Chairman Jay Clayton may feel that his agency is getting closer to approving an index fund tracking cryptocurrencies, but it’s apparently not close enough for the Chicago Board Options Exchange, which just withdrew its application to create a Bitcoin EFT.
In January, the Cboe’s BZX Exchange asked the SEC to allow it to create the VanEck/SolidX Bitcoin Trust exchange traded fund (ETF) so it could sell shares in an index tracking Bitcoin to retail customers. On September 17, the agency announced that Cboe had cancelled its request for the necessary rule change.
Earlier this month, the BZX Exchange announced plans to create a similar fund available only to large institutional investors.
A competing ETF application focused on retail investors from Bitwise remains before the SEC.
This is the second time Cboe withdrew its application, the first coming in late January, when the government shutdown interfered with the approval process. Cboe reapplied a week later, on January 31. The SEC has already delayed ruling on this application twice, but a final decision was due on October 18.
While the agency did not give any reason for Cboe’s decision, Clayton said on September 9 that although the commissioners were getting closer to being ready to approve an ETF, “there’s work left to be done.” Specifically, there are “hard questions” still to be answered about market manipulation and cryptocurrency custody security, he told CNBC.
VanEck’s director of digital assets strategy, Gabor Gurbacs, tweeted that the company remains “committed to support Bitcoin and Bitcoin-focused financial innovation. Bringing to market a physical, liquid and insured ETF remains a top priority. We continue to work closely with regulators & market participants to get one step closer every day.”
He also suggested that the decision was strategic. Replying to a tweet asking for a reason for the withdrawal, he said, “At the poker table…can you show me your cards?”
In a nine-part Twitter thread on September 18, Jake Chervinsky, a Georgetown University law professor and general counsel for Ethereum-based lending pool Compound, speculated that by withdrawing the application, VanEck prevented the SEC from writing “a formal order explaining why it was deficient.”
That’s important, he added, because “[t]hose orders become precedent that the SEC considers in the future, and bad precedent could make the task of getting approval even harder.”
On the other hand, tweeted Chervinsky, “If Bitwise expects rejection, won’t they withdraw their proposal too? Maybe, maybe not: sometimes it helps to have the SEC’s concerns on record, so as to clearly address them down the road. Precedent has its benefits too.”
He ended by saying, “[e]ither way, I’d put the chance of approval at 0.01%.”