In a recent interview with Bloomberg TV, BitGo CEO Mike Belshe expressed a cautious outlook on the approval of spot Bitcoin exchange-traded funds (ETFs) by the U.S. SEC. Belshe pointed out that while there have been positive developments in discussions between ETF applicants and the SEC, the likelihood of further rejections is high.
The primary concern highlighted by Belshe revolves around market structure issues, particularly the SEC’s insistence on the separation of exchange and custody roles. This separation has been a contentious issue in various applications, especially those involving Coinbase custody. Belshe noted that aligning with this separation model would benefit the crypto market, but he also acknowledged that the potential rejection of ETF applications could hinge on the SEC’s concern that exchanges and custody functions are not adequately separated. He specifically pointed out risks associated with Coinbase, a chosen custody partner for most ETF applicants, and believes the SEC will demand a complete separation of these functions before approving the applications.
Analysts have predicted a 90% chance of ETF approval in January 2024, but Belshe’s remarks indicate that rejection remains a distinct possibility. The SEC has historically rejected ETF applications, citing concerns about potential market manipulation and insufficient customer protection. However, the applicants have argued that the regulator’s concerns are unfounded based on its approval of Bitcoin futures ETFs.
The anticipation for a spot Bitcoin ETF has been a driving force behind recent Bitcoin price rallies, with the crypto community closely monitoring the SEC’s decisions. Bitcoin is up roughly 45% since BlackRock filed its ETF application and is currently trading at $36,450 after reaching a high of $38,000 earlier in the week.
Overall, Belshe’s comments indicate that while there is optimism surrounding the potential approval of a spot Bitcoin ETF, there are still significant hurdles to overcome before such an ETF can hit the market. The market structure issues highlighted by Belshe, along with the SEC’s historical rejections of ETF applications, suggest that further complications may lie ahead in the path to ETF approval. As the crypto community eagerly awaits the SEC’s decisions, it remains to be seen how these challenges will impact the future of Bitcoin ETFs.