Following the United States Securities and Exchange Commission (SEC) approval of several fund managers’ applications to list spot Bitcoin exchange-traded funds (ETFs), SEC Commissioner Mark Uyeda expressed “strong concerns” regarding three aspects of the approval order.
Uyeda voted in favor of approving the Bitcoin ETF applications but criticized the analytical approach taken by the commission to reach its decision. He expressed fears that the SEC’s rationale and legal analysis could set a problematic precedent for the future. He stated:
“The flawed reasoning in the [spot Bitcoin ETF] Approval Order could reverberate for years to come.”
According to Uyeda, the SEC missed an opportunity to treat Bitcoin like any other commodity and instead singled out Bitcoin ETFs after they failed to satisfy the SEC’s novel “significant size” test. He argued that spot Bitcoin exchange-traded product (ETP) applications should have been approved earlier under that standard. Uyeda also noted that the approval order does not provide additional explanation for why it treats spot Bitcoin ETPs differently from Bitcoin futures ETPs under the “significant market” test.
While none of the Bitcoin ETF applicants satisfied the SEC’s significant market test, the approval cited “other means” that met the requirements. Uyeda criticized the SEC for inventing a new standard after forcing applicants to spend years pursuing the “significant market” requirement. He suggested that the SEC should have communicated its expectations clearly instead of requiring applicants to make multiple attempts in hopes of eventually meeting the “significant market” test.
Uyeda also questioned the SEC’s motivation for accelerating the approval of spot Bitcoin ETFs, suggesting it aimed for a first-mover advantage. He pointed out the lack of analysis regarding how the cash-only creation and redemption feature could prevent fraud. He emphasized the importance of transparency in the analysis and reasoning provided in approval orders.
Despite his objections to the legal analysis in the approval order, Uyeda concluded that he supports the issuance of the Approval Order due to independent reasons for believing that the applications meet the standards for approval outlined in the Exchange Act.
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