- Grayscale Bitcoin Trust
- Ark/21Shares Bitcoin Trust
- Bitwise Bitcoin ETF Trust
- BlackRock Bitcoin ETF Trust
- VanEck Bitcoin Trust
- WisdomTree Bitcoin Trust
- Valkyrie Bitcoin Fund
- Invesco Galaxy Bitcoin ETF
- Fidelity Wise Origin Bitcoin Trust
- Global X Bitcoin Trust
- Hashdex Bitcoin ETF
- Franklin Templeton Digital Holdings Trust
- Pando Asset Spot Bitcoin Trust
How the SEC will proceed
The applications consist of two components:
1) A 19b-4 filingThis is a form used by exchanges to notify the SEC of a proposed rule change. In this case, a rule change is required under the Securities Exchange Act of 1934 because a spot Bitcoin ETF is a new product and the exchanges – NYSE, Nasdaq and Cboe – must provide rules to explain how product is traded. The SEC must approve the rule changes before the product can be traded. This is the filing deadline for the Ark/21Shares Bitcoin Trust on January 10th.
2) Approval of S-1. This is an application a new security with the SEC in a document that contains information about the specific security. In this case, each company that files the spot Bitcoin ETF will have differences in the way the product could be structured. In the case of the Grayscale Bitcoin Trust, an S-3 filing must be approved, which is a simplified security registration form for companies that have complied with other reporting requirements.
It is widely expected that once the 19b-4 filings are approved, the SEC will separately approve the S-1 filings of all ETF applicants at once. However, since the applications are different, this is not a slam dunk. The SEC could decide to approve some, but not all, S-1s.
Big spread in fees
With 13 companies applying for a Bitcoin ETF, all of which are similar products, there is a lot of interest in what the fee structure will be.
Fidelity's Wise Origin Bitcoin Fund has announced that it will charge 39 basis points or 0.39%. Invesco's Galaxy Bitcoin ETF has set its expense ratio at 59 basis points, which will be waived for the first six months and the first $5 billion of assets. Ark/21Shares and Valkyrie charge 80 basis points.
Grayscale Bitcoin Trust currently charges a 2% fee, but has said it is committed to reducing the fee once its application to convert to a Bitcoin ETF is approved.
Other applicants have not yet announced their fee structure.
It is unclear who the primary regulator of the crypto industry is
All of this comes against the backdrop of SEC Chairman Gary Gensler's long-running battle with the crypto industry.
Gensler has fought several court battles against major crypto players, including a losing battle against Grayscale Bitcoin Trust, which won a case against the SEC last summer. In that case, the US Court of Appeals for the D.C. Circuit ruled that the SEC had already approved a futures-based Bitcoin product and that it had not explained why it declined to approve a spot Bitcoin product. The court said that futures and the spot market were essentially “similar” products. Logically, if the SEC approved one, it also had to approve the other.
Bitcoin has been classified as a commodity, but with the exception of Ether, there are no such regulations for other cryptocurrencies. In the absence of clear federal regulations, the SEC has resorted to regulation through enforcement to show that many cryptocurrencies are securities and therefore has regulatory authority over much of the crypto industry.
There is an outstanding case against Coinbase, the largest U.S. crypto exchange, in which the SEC alleges the company violated rules requiring it as an exchange. In this case, the SEC claimed that some of the crypto assets traded on Coinbase were securities and fell under the jurisdiction of the SEC.
The SEC sued Binance and its founder Changpeng Zhao last June, alleging that Binance and Zhao were “enmeshed in an extensive web of deception, conflicts of interest, lack of disclosure and deliberate evasion of the law,” Gensler said.
The case is ongoing, but in November the US Department of Justice settled various charges against Binance and Zhao. Zhao pleaded guilty to money laundering violations and agreed to pay a $50 million fine and step down from his role as the company's chief executive. Binance also accepted the appointment of a government observer to monitor the business.
ARK Invest's Cathie Wood will be a guest on “Halftime Report” on Monday at 12:35 p.m. and on “ETF Edge” on ETFEdge.cnbc.com on Monday at 1:10-1:30 p.m. ET.