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SEC faults Spot Bitcoin ETF Filings; says they lack clarity

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The US Securities and Exchange Commission has reportedly shown that the information provided by the Bitcoin ETFs application it has received is not enough to approve the applications. According to WSJ, the SEC related the decision to Nasdaq and Cboe – the two exchanges via which BlackRock, Fidelity, and other firms filled their Bitcoin ETFs.

Bitcoin ETFs (Exchange-Traded Funds) are investment vehicles that track the price of Bitcoin, offering investors exposure to the cryptocurrency without requiring direct ownership. Similar to stocks, ETFs are financial products traded on stock exchanges and are designed to replicate the performance of an underlying asset or index.

An objective of a Bitcoin ETF is to mirror the price movements of Bitcoin by holding the cryptocurrency itself or derivatives contracts linked to it. The ETF provider assumes responsibility for managing the custody, storage, and security of Bitcoin on behalf of the investors. When investors purchase shares of a Bitcoin ETF, they indirectly own a portion of the Bitcoin held by the fund.

Over the past five weeks, there has been a rush to obtain approval for a Bitcoin ETF in the US including BlackRock and Fidelity. However, the financial authority led by Gary Gensler in the US refused to approve the applications, citing a lack of clarity and understanding as reasons.

This is not surprising news, as it is not the first time the SEC has rejected a Bitcoin ETF application. While the SEC has approved several futures-based Bitcoin ETFs, the spot Bitcoin ETFs proposed by the Winklevoss brothers in 2017 were among the initial Bitcoin-based ETFs rejected by the SEC.

In June 2022, the SEC rejected applications by Grayscale Investments and Bitwise Asset Management. Other rejected applications came from Global X, Kryptoin, Fidelity/Wise Origin, NYDIG/Stone Ridge, One River, Galaxy Digital, and VanEck.

Furthermore, aside from the applications submitted by BlackRock and Fidelity, WisdomTree, Invesco, Valkyrie Investments, and Ark Invest have expressed interest in Bitcoin ETFs in 2023. Speculations are also circulating that the SEC might approve Bitcoin ETFs soon.

The introduction of Bitcoin ETFs has generated significant anticipation within the financial industry. These ETFs offer a regulated and accessible avenue for traditional investors to invest in Bitcoin.

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