SEC denies First Trust Advisors-SkyBridge application for Bitcoin ETF

abdelaziz Fathi

The US Securities and Exchange Commission (SEC) has again rejected another bid to list a spot bitcoin exchange-traded fund (ETF), which is widely seen as a proxy into crypto for millions of retail investors.

Bitcoin in a few hands

The SEC denied an application by First Trust Advisors and SkyBridge, citing concerns over “fraudulent and manipulative acts and practices” in markets where bitcoin is traded.

SkyBridge, the hedge fund founded by former White House communications director Anthony Scaramucci, has jumped into the fray for a bitcoin exchange-traded fund back in March 2021. He joined forces with investment advisory firm First Trust Advisors to launch a crypto ETF that will seek to buy and sell bitcoin “so that the total value of the bitcoin held by the Trust is as close to 100% of the net assets of the Trust as is reasonably practicable to achieve,” according to their joint filing with the SEC.

The agency, however, said the filing did not meet “the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices’ and ‘to protect investors and the public interest.”

The SEC has previously rejected or postponed other applications for bitcoin ETFs, but recently gave the greenlight to two bitcoin futures-based ETFs, leading to speculation that it could approve a spot vehicle.

Earlier this month, the SEC said it expects to decide whether to approve or disapprove the spot bitcoin product proposed by New York Digital Investment Group (NYDIG) on March 15.

Stone Ridge Asset Management’s bitcoin spin-off firm has filed with the agency to list the ETF on the New York Stock Exchange under a yet-to-be-determined ticker symbol. The bitcoin tied to the product would be custodied with its trust arm. NYDIG’s filing also notes that the firm will be working with investment giant Morgan Stanley as an initially authorized participant.

Other applications are awaiting rulings

There is a long history of proposed Bitcoin ETFs that have been rejected by the SEC, citing concerns over extreme price volatility and potential fraud risks for investors.

Last month, the regulator extended its review of NYSE Arca’s “actual” Bitcoin ETF, named Bitwise Bitcoin ETP Trust, and Grayscale Bitcoin Trust’s Bitcoin ETF. The regulatory body said in an extension notice that it would now give an answer on these proposal on February 1 and 6, respectively.

The agency only extended the deliberation window or opened the matter to public comments to avoid reaching any decision on a proposal.

Earlier in in October, the regulator also pushed the deadline to make a decision on Kryptoin Bitcoin ETF, Global X Bitcoin Trust, Valkyrie XBTO Bitcoin Futures Fund, and Wisdomtree Bitcoin Trust.

SEC Chair Gary Gensler said that he would be open to approving a bitcoin-futures ETF, but only under certain conditions. The revelation rankled some fund managers who were hopeful of a physically backed ETF, but regulated like a normal exchange-traded fund under a 1933 law.

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