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In the Midst of Controversy: Predicting the Fate of Bitcoin Spot ETFs

In the Midst of Controversy: Predicting the Fate of Bitcoin Spot ETFs

Following Grayscale’s recent legal victory against the SEC, a heated debate has emerged surrounding the likelihood of Bitcoin spot ETFs gaining approval. While market watchers lean towards optimism, BitGo’s CEO, Mike Belshe, presents a contradicting opinion, stating that the SEC may reject several Bitcoin spot ETF applications in the near future.

Factors Influencing ETF Approval

Sourcing a major concern, Belshe elucidates the prevailing absence of a clear distinction between cryptocurrency exchanges and custodial service providers. He brings Coinbase into focus as a particularly concerning example due to its dual role. This lack of separation is a potential stumbling block, as the SEC is likely to require Bitcoin spot ETF applicants to distinctly separate exchange services from custodial ones.

However, Belshe’s point of view appears to be a minor concern for major asset management firms such as BlackRock and Valkyrie. These firms have selected Coinbase as their Bitcoin custodian of choice, undeterred by the absence of separation between its exchange service and custodial services.

Growing Enthusiasm for Bitcoin Spot ETFs

Interest in Bitcoin spot ETFs has seen a surge among heavyweight firms like BlackRock, Valkyrie, WisdomTree, Grayscale, Fidelity, and Ark Invest, all of which are actively pursuing approval from the SEC. Analysts like James Seyffart are equally optimistic, estimating as high as a 90% chance of Bitcoin spot ETFs gaining approval by January 2024.

BlackRock Diversifies ETF Portfolio

In a further development, BlackRock has broadened its ETF approach beyond Bitcoin and has filed an S-1 form with the SEC to allow investors access to the price performance of Ethereum. The proposed iShares Ethereum Trust promises an exciting addition to BlackRock’s existing crypto-based ETF offerings.

Similar to the firm’s spot Bitcoin ETF, Coinbase is expected to handle custodial services for the Ethereum ETF. This move by BlackRock implies continued confidence in Coinbase’s capacity to act as both custodian and exchange service.

Approval Stages Ahead

The S-1 form filing by BlackRock marks the onset of the approval process for its Ethereum ETF. The succeeding stages, involving the Trading and Markets Division and Corporate Finance Division of the SEC, will shed light on whether BlackRock’s faith in Coinbase aligns with the SEC’s evaluation criteria.

What the Future Holds

Despite the growing optimism, viewpoints like Belshe’s suggest the road to approval for Bitcoin spot ETFs may be full of pitfalls. His pessimistic predictions hint at possible further rejections, sparking debates within the industry.

The final decision on Bitcoin spot ETFs remains in the hands of the SEC. But regardless of what transpires on the regulatory front, the rising interest in Bitcoin and Ethereum ETFs from industry titans like BlackRock, Valkyrie, and others undeniably signals a strengthening bridge between traditional finance and the world of cryptocurrencies.

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