SEC May See Fidelity/BlackRock Bitcoin ETF As Least Worst Option

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  • The SEC may approve a BlackRock/Fidelity because it is a safer bet than the alternatives
  • Brokerage firm Bernstein believes this SEC mindset will see approval this year
  • The authority may prefer an established player as opposed to Grayscale

The Securities and Exchange Commission (SEC) may see a Fidelity/BlackRock Bitcoin ETF as the least worst option and approve it, according to a report from brokerage firm Bernstein. In a report seen by Coindesk, Bernstein says that the SEC may approve recent filings by the investment giants because it would prefer to allow established players to take the lead rather than more complicated and inexperienced players such as Grayscale. This opinion follows a glut of Bitcoin ETF applications which began with BlackRock at the start of June.

Spot Bitcoin ETF Concerns

The Bernstein report notes that the SEC last year approved futures-based bitcoin ETFs and recently approved leverage-based futures ETFs due to the fact that pricing comes from a regulated exchange such as the Chicago Mercantile Exchange (CME). The company’s analysts, led by Gautam Chhugani, believe that the SEC’s view is that a spot Bitcoin ETF would not be reliable because the spot exchanges the companies want to use (for exampleCoinbase) are not under its regulation, and therefore spot prices are “not reliable and prone to manipulation.”

The report highlights the attempts by Grayscale to turn the Grayscale Bitcoin Trust into a spot Bitcoin ETF and the lawsuit that has followed, which some analysts have said looks to have swung in Grayscale’s favor. Bernstein, however, is not convinced:

The court did not sound convinced that the futures price is not derived from the spot price, and thus to allow a futures-based ETF and not allow spot sounds like a difficult pill to swallow for the courts.

Least Worst Option

Despite the fact that it clearly doesn’t find the prospect of a Bitcoin ETF palatable, Bernstein says that the SEC might have to bow to institutional demand and allow one from established players like BlackRock and Fidelity because they will be easier to deal with and regulate compared to the Grayscale offering:

SEC would rather bring in a regulated bitcoin ETF led by more mainstream Wall Street participants and with surveillance from existing regulated exchanges, than having to deal with a Grayscale OTC product filling the institutional gap.

The momentum behind a Bitcoin ETF approval is clearly building, and reports like this from those with insight into the matter show that this time the optimism may finally be well placed.