A Bitcoin ETF has long been seen as the holy grail that Bitcoin needs in order to achieve its status as a legitimate financial entity. However, last week’s rejection of the Wilshere Phoenix application ensures that almost seven years’ worth of effort from hundreds of people across several different applicants have come to nothing. With millions of dollars now spent and no ETF to show for it, what is the future for Bitcoin’s crowning glory?
Bitcoin ETF Applicant Pool Evaporates
The first Bitcoin ETF application was made all the way back in 2013 by the Winklevoss twins, and the intervening years have seen attempts by several entities, including the Chicago Board Options Exchange (Cboe), to fall in line with the strict policies of the Securities and Exchange Commission (SEC) and get an ETF approved.
All have failed however, with the most recent rejection of the Wilshere Phoenix application representing the last remaining active chance for a Bitcoin ETF. The repeated practice of delay, delay, reject by the SEC will likely have put off any new entrants in the space, with SEC commissioner Hester Pierce referring to the commission’s perceived intransigence in her Dissenting Statement regarding the Wilshere Phoenix rejection:
This line of disapprovals leads me to conclude that this Commission is unwilling to approve the listing of any product that would provide access to the market for bitcoin and that no filing will meet the ever-shifting standards that this Commission insists on applying to bitcoin-related products—and only to bitcoin-related products.
Is the Bitcoin ETF Dead?
So, is the ETF idea dead? The SEC is not known for its forward-thinking nature, as Pierce has mentioned on several occasions in the past, and so any application regarding a non-traditional asset has to be above reproach.
Unfortunately, Bitcoin has had an image problem since its creation among traditional financial establishments, and with the Wilshere Phoenix rejection featuring the same concerns over “fraudulent and manipulative acts and practices” that saw the Bitwise ETF dismissed last October, it is clear that, in the SEC’s eyes, it still does. With the technology in place to offer a safe, fast, and reliable ETF platform, it is clear that it is the asset itself that is the problem.
Base Concerns Need Addressing
So what does the future look like for a Bitcoin ETF? There’s no doubt that the raft of regulations for cryptocurrencies, both those being enacted now and those yet to come, will act in the asset’s favor in terms of reducing fraud.
Security of assets will of course play a major role in any ETF going forward, with crypto hacks making for many a juicy newspaper headline, but it must be remembered that ETF applications should only be concerned with the security of the platform being used for the ETF itself, not the industry as a whole.
The same goes for manipulation, with the burden being on ETF applicants to prove that their platform is free from trading manipulation, regardless of other platforms. The SEC also takes into consideration manipulation of the asset itself when considering ETF applications, and with whales (those who own between 1,000 and 1 million BTC) owning some 42% of the entire circulating supply, price manipulation is certainly a concern, which is ironic, considering the amount of manipulation that goes on in the metals markets.
SEC Needs to Show Willing
With no ETF applications left in the works, anyone applying today would be looking at a 14-18 month waiting time, were the SEC to string out the application process for the full term, which they often do. However, given that the underlying reasons for the SEC’s rejections almost always come down to Bitcoin’s fundamentals, it is likely that an approval is at least 3-5 years away, but probably more.
Bitcoin’s only saving grace would be if more individuals like Pierce were appointed to decision-making positions with the SEC in the coming years, which might give cryptocurrencies like Bitcoin a better shot at being accepted.
Something will have to happen from the SEC’s side to give anyone the impetus to try again for a Bitcoin ETF, and for the time being, that looks distinctly unlikely.
