On March 10, the United States Securities and Exchange Commission (SEC) denied VanEck’s application to create a spot Bitcoin trust, sparking criticism from commissioners Mark Uyeda and Hester Peirce. The commissioners released a statement pointing out discrepancies in the application of standards to exchange-traded products (ETPs). The SEC has denied nearly 20 applications for a spot Bitcoin trust in the last six years, and the decision to deny VanEck’s application “repeats the analysis that the Commission has given in each of these recent orders,” according to the statement.
The SEC argued that VanEck has no “comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot bitcoin,” a requirement applied to all ETPs. However, the commissioners argue that the SEC is using a different set of standards for spot Bitcoin ETPs than for other commodity-based ETPs, applying a uniquely burdensome definition of “significant” in its analyses of spot Bitcoin ETP filings. The SEC has not required any connection between the spot and futures markets to be demonstrated for other commodity-based ETPs, and “significant” seems to be applied to liquidity and volume of the trading venue in cases that do not involve Bitcoin.
VanEck has already launched a Bitcoin futures-linked financial product and has been attempting to gain approval for a spot-linked product since 2017. The SEC delayed making a decision on the company’s current, and third, application for a spot ETP for months.
Commissioner Uyeda, who was appointed to his post in June 2021, also released a statement in February criticizing the SEC’s proposed toughening of custody rules, stating that it appeared to be a policy decision to block access to crypto as an asset class. The commissioners argue that the SEC is required by law to explain changes to its policy for approving commodity-based ETPs.
The denial of VanEck’s application highlights ongoing challenges faced by cryptocurrency investment managers in gaining regulatory approval for new products. The SEC’s decision raises concerns about potential double standards and the need for greater clarity and consistency in regulatory requirements for cryptocurrency ETPs.
