Global investment bank JPMorgan anticipates that the U.S. Securities and Exchange Commission (SEC) would approve several spot bitcoin exchange-traded funds (ETFs) concurrently rather than favoring one company by being the first to do so. The bank's analyst explained that the securities regulator would need to retroactively revoke its prior approval of bitcoin futures ETFs if it want to defend its rejection of Grayscale's petition to convert its bitcoin ETF. "Such a retroactive withdrawal" would be "very disruptive and embarrassing for the SEC," he said.
JPMorgan anticipates the approval of several spot Bitcoin ETFs.
In a note published last week, JPMorgan analyst Nikolaos Panigirtzoglou explained how a court decision in favor of Grayscale Investments regarding the crypto asset manager's application to convert its bitcoin trust into a spot bitcoin ETF may force the U.S. Securities and Exchange Commission (SEC) to approve a number of spot bitcoin exchange-traded funds (ETFs).
The JPMorgan analyst stated, "The court ruling on the Grayscale case against the SEC has boosted crypto markets optimism," going on to explain:
Following the recent SEC v. Ripple court ruling, this decision has increased hope that the SEC's aggressive campaign against cryptocurrency companies, which has been ongoing since the beginning of the year, may wane as the SEC contends with legal issues.
The denial by the SEC of Grayscale's proposal to convert its closed-end bitcoin trust to a spot bitcoin ETF was 'arbitrary and capricious because the Commission failed to explain its different treatment of similar products,'" Panigirtzoglou explained in the Grayscale v. SEC court ruling.
Since the spot bitcoin market and the CME bitcoin futures market are closely interrelated, the court effectively argued that fraud and manipulation in the spot bitcoin market constitute a similar danger to both futures and spot products. The court concluded that the SEC's decision to permit bitcoin futures-based ETFs but ban spot bitcoin ETFs was unjustified, according to the analyst.
According to Panigirtzoglou, "This is highly significant because it implies that the SEC would have to retroactively withdraw its prior approval of futures-based bitcoin ETFs in order to defend its denial of Grayscale's proposal to convert its closed-end bitcoin trust to a spot bitcoin ETF."
This, according to him, "looks unlikely in our mind" since "Such a retroactive withdrawal would be very disruptive and embarrassing for the SEC." Added the JPMorgan analyst:
Instead, it appears more likely that the SEC would be compelled to approve the pending spot bitcoin ETF applications from a number of asset managers, including Grayscale.
The SEC decision on pending spot bitcoin ETF applications was recently delayed until October. This, the author continued, "likely points to approval of multiple spot bitcoin ETF applications at once rather than granting a first mover advantage to any single applicant." "That might be advantageous for investors since it would allow for more ETF fee competition. If Grayscale's trust is approved to become the world's largest bitcoin spot ETF, there will certainly be even more pressure to reduce fees.
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