The US Securities and Exchange Commission (SEC) is requesting the public for additional feedback regarding the proposed spot Bitcoin (BTC) exchange-traded-funds (ETFs) from Franklin Templeton and Hashdex.
The SEC stated on Tuesday (November 28, 2023) that it is seeking more feedback from the public regarding if it should either approve or reject a spot Bitcoin ETF that has been proposed by asset management firm Franklin Templeton. This recent update has come shortly after first postponing a decision on the proposed fund.
JUST IN: SEC DELAYS FRANKLIN SPOT #BITCOIN ETF pic.twitter.com/Ypm58xVTMr
— WhaleWire (@WhaleWire) November 28, 2023
This recent update has led to industry analysts pointing out that the regulator seemed to be moving more quickly on the matter.
The SEC stated that it is looking for additional analysis and is instituting proceedings in order to achieve this. The regulatory authority has requested for comments on Tuesday regarding concerns that market manipulation and fraudulent activities could be an issue. The SEC is also wanting to learn more about the fund’s relationship with digital currency exchange Coinbase, which could serve as the custodian should the ETF be approved.
The SEC stated that it is “providing notice of the grounds for disapproval under consideration.”
The agency also mentioned that it was looking to analyze if the said application is consistent or aligns with 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 also mentioned:
“Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved…the Commission seeks and encourages interested persons to provide comments on the proposed rule change.”
It’s worth noting that the asset management firm had initially filed for the Franklin Bitcoin ETF back in September, and, should it get approved, could have shares get listed on the Cboe BZX Exchange.
As widely reported, several different applications for spot Bitcoin ETFs have been submitted by other large asset management firms such as BlackRock and Fidelity.
In statements shared with CI, Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International, noted that last week, the US Department of Justice (DOJ) announced a settlement with the world’s largest crypto exchange Binance, “concerning the regulatory accusations against the platform.”
According to Greco, the substantial fine and the departure of the CEO led “to a market dip, with BTC trading as low as $35,700. The following day, the price rebounded, closing at $37,400 and has been maintaining stability since then.”
Greco added that the initial negative sentiment following the Binance CEO’s departure “was swiftly offset by the positive news that the major digital asset exchange faced no further regulatory action from US authorities, contributing to renewed stability in the market.”
Any news related to settlements “between law enforcement and digital asset service providers plays a vital role in bridging traditional finance and digital assets, increasing the likelihood of capital inflow from traditional finance investors.”
Greco also mentioned that this sentiment is further “supported by the discount of the Grayscale Bitcoin Trust (GBTC), currently at 8.1%.”
He pointed out that this “marks the narrowest discount recorded since August 2021, indicating increased investor confidence in the potential approval of a Bitcoin Spot ETF, with the final deadline for the SEC’s decision set for January 10, 2024, regarding one of the multiple filings.”
Investor confidence is also “evident in the Grayscale Ethereum Trust (ETHE), currently trading at a 12.7% discount, the narrowest level since January 2022.”
From a market perspective, the total digital assets market cap reached $1.5 trillion, “the highest level since early May 2022, coinciding with the UST-Luna collapse.”
Greco added that this event “triggered a market-wide crash and liquidity squeeze which has now been fully absorbed by the market. Capital inflows are also reflected in the ETPs market, which recently recorded the highest amount of Bitcoin under management integrated into financial instruments.”
November brought a resurgence “in trading activity, with the total volume on centralized exchanges reaching around $729 billion, the highest since the beginning of Q2 2023. However, liquidity has not seen a proportional improvement, with slippage for a $100,000 sell order on the BTC/USD pair remaining at similar levels observed in previous months. Price slippage, indicating the difference between expected and executed trade prices, has not fully recovered since the FTX collapse and Alameda’s exit from the market.”
According to Greco, this suggests that market makers “remain cautious in providing additional liquidity, despite the strong price action and renewed trading activity.”
Greco further noted:
“On this note, the approval of US-based Bitcoin Spot ETFs could not only likely bring a capital influx but also inject significant liquidity into the market, fostering more stable prices and facilitating more favorable trades on both digital assets exchanges and financial instruments incorporating digital assets as underlying assets.”