SEC rejects proposal for spot bitcoin ETF from Fidelity
The US Securities and Exchange Commission has denied Fidelity Investments’ application for a long-awaited spot bitcoin exchange-traded fund (ETF), the SEC said in a letter on Thursday.
The agency is yet to approve a bitcoin spot ETF application as it remains concerned about potential fraud and manipulative practices in the cryptocurrency space.
Approval of Fidelity’s proposed ETF, called Wise Origin Bitcoin Trust, would have allowed retail and institutional investors to invest in a regulated financial product without requiring them to invest in the crypto directly. The proposed vehicle would track the world’s oldest cryptocurrency through the Fidelity Bitcoin Index, which takes spot prices from various Bitcoin markets.
The world’s fourth-largest fund manager, with assets of $4.2 trillion, has originally submitted its proposal back in March 2021. Its entry into the crypto market was seen as a further sign of the growing acceptance of digital assets in the traditional investment world.
“It is essential for an exchange listing a derivative securities product to enter into a surveillance-sharing agreement with markets trading the underlying assets for the listing exchange to have the ability to obtain information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules,” stated the SEC ruling.
The SEC has yet to give the go-ahead
The decision comes a few weeks after an affiliate of the Boston-based asset manager launched a similar spot bitcoin ETF in Canada. Called ‘Fidelity Advantage Bitcoin ETF (FBTC)’, the fund obtains physical Bitcoin rather than acquiring it through a derivative instrument.
“While we are disappointed by the outcome of the SEC’s deliberations resulting in today’s disapproval order, we reaffirm our belief in market readiness for a physical bitcoin exchange traded product and look forward to continued constructive dialogue with the SEC,” said Fidelity investments communications director Claire Putzeys.
The SEC’s refusal comes a few days after the regulator denied an application by First Trust Advisors and SkyBridge, citing concerns over “fraudulent and manipulative acts and practices” in markets where bitcoin is traded.
The agency 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.