SEC Pushes Back Against Fidelity, BlackRock Spot Bitcoin ETF Filings

Katherine Doherty and Lydia Beyoud, Bloomberg News

A flag outside the U.S. Securities and Exchange Commission headquarters in Washington, D.C., U.S., on Wednesday, Feb. 23, 2022. Hedge funds and other investors would have less time to disclose that they've acquired a significant stake in a company under new rules proposed by the SEC. Photographer: Al Drago/Bloomberg , Bloomberg

(Bloomberg) -- The US Securities and Exchange Commission is pushing back against a wave of filings by asset managers to launch the first US exchange-traded fund that invests directly in Bitcoin, saying the applications lack clarity and further information is needed before they’re considered for approval.

The agency told exchanges including Nasdaq and Cboe Global Markets, which filed the applications on behalf of BlackRock and Fidelity Investments, that their filings are insufficient, according to people familiar with the matter. A Cboe spokesperson confirmed that it will refile on the behalf of Fidelity. Nasdaq is working to answer questions and give updates for its next iteration of the filing.

Representatives for the SEC, Fidelity, Nasdaq and BlackRock declined to comment. The Wall Street Journal first reported the SEC reaction to the filings.

“It’s important to note that the SEC is not saying that the proposed provisions to meet the 1933 Securities and Exchange Act are ‘inadequate,’” said Sui Chung, chief executive of CF Benchmarks, which provides the index set to be used by in the BlackRock proposal. “But that the filing in themselves are ‘inadequate,’ being not clear and comprehensive. In short the SEC needs more descriptive detail around the proposed provisions to be able to make a judgment.”

There have been about 30 tries for a Bitcoin product, according to a tally from Bloomberg Intelligence. But applications have faced opposition by regulators, who have in the past cited market concerns and a lack of investor protections, among other things. Fidelity originally filed for the Wise Origin Bitcoin Trust in 2021, which was denied by the SEC in January 2022. The SEC has already approved a futures-based Bitcoin ETF.

Fans of digital assets are excited about the prospect of crypto potentially becoming more easily accessible to everyday investors, and the wave of filings has been a boon for token prices. Bitcoin jumped back above $30,000 in June and is trading at its highest levels in about a year. The token on Friday traded around $30,300. That’s still less than half the record of almost $69,000 reached in November 2021.

Both Nasdaq and Cboe are working on providing new information in the hopes they meet the SEC’s threshold for approval, according to the people who asked not to be named publicly. They plan to revise and re-file their applications based on feedback and talks with the regulators, the people said.

The SEC would take public comment on the amended application before making any final decision, the people said. Eventually, the agency will give a firm yes or no for approval, depending on their comfort level with revised applications, they said.

--With assistance from Katie Greifeld, Muyao Shen and Vildana Hajric.

(Adds comment from an index data provider in the fifth paragraph.)