Early Rejection of BlackRock’s Bitcoin ETF Filing a Procedural Hurdle, Says Nasdaq Executive

By Tsunami 09/14/23 12:48 PM

In the fast-paced world of cryptocurrency investments, the recent early dismissal of BlackRock’s planned spot Bitcoin ETF filing by the U.S. Securities and Exchange Commission (SEC) may have raised some eyebrows. However, according to Nasdaq executive Giang Bui, this setback should not be perceived as a stumbling block for the eventual success of BlackRock’s Bitcoin ETF.

The story began on June 15, when BlackRock, one of the world’s largest asset management firms, filed an application for a spot Bitcoin exchange-traded fund (ETF). The move was seen as a significant step towards bringing cryptocurrencies into mainstream investment portfolios. Yet, it was not BlackRock but Nasdaq that was responsible for filing Form 19-b4, which proposed rule changes needed to list the product.

On June 30, the SEC made the surprising decision to declare the filing, along with others, inadequate, leading to its early rejection. This unexpected turn of events left many wondering whether this was a sign of trouble for BlackRock’s ambitious ETF plans.

Giang Bui is leading the bitcoin ETF charge at Nasdaq
NASDAQ

However, Giang Bui, Nasdaq’s Head of U.S. Equities & ETPs, has shed light on the situation. According to Bui, “Once the exchange files [19-b4], the SEC has seven business days to reject it if it determines that it doesn’t comply with the SEC rules related to form. The rejection at that stage is purely procedural, rather than an indication of viability of the product.”

In essence, the SEC’s rejection was more about regulatory procedural issues than an evaluation of the substance or potential viability of BlackRock’s Bitcoin ETF. This revelation from a high-ranking Nasdaq executive should reassure investors that the fundamentals of the product are still intact.

Following the initial rejection, Nasdaq and other entities filed updates for various ETF applications. One noteworthy addition was the explicit listing of Coinbase as a surveillance-sharing agreement partner. Bui acknowledged that this was an unusual move but explained it as Nasdaq’s attempt to make its filing “as strong as possible.”

It’s important to note that BlackRock’s proposed spot Bitcoin ETF is not the only application of its kind in the works. Nasdaq is simultaneously handling a similar proposal from Valkyrie Investments. Meanwhile, other exchanges like Cboe are also processing ETF proposals from various asset management firms, including Ark Invest, VanEck, WisdomTree, Invesco, and Fidelity. NYSE Arca is handling an ETF proposal from Bitwise. Many of these proposals share common elements and describe surveillance-sharing agreements with Coinbase.

The rejection of BlackRock’s filing should not be taken as a sign of an insurmountable obstacle. Rather, it reflects the rigorous regulatory scrutiny that new financial products, especially in the volatile world of cryptocurrencies, undergo before reaching the market.

In conclusion, while BlackRock’s early setback may have raised questions, Giang Bui’s clarification regarding the procedural nature of the rejection provides valuable context. The road to a Bitcoin ETF is paved with regulatory hurdles, but the long-term prospects for such products appear promising, given the continued interest from major financial institutions and exchanges.

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