SEC Poised to Greenlight Bitcoin ETFs amid Political Imperatives

According to investment bank TD Cowen, the U.S. Securities and Exchange Commission (SEC) will authorize a spot bitcoin exchange-traded fund by January 10 as a “political necessity.

“Before Congress considers broader crypto legislation, this is a political necessity as the agency must solidify its function as a regulator of cryptocurrencies,” TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note on Tuesday.

“Additionally, we think that the agency is averse to losing a legal challenge to its denial of approval for bitcoin ETFs.”

The SEC must determine by January 10 whether to accept or reject an application from 21Shares and Cathie Wood’s ARK Investment—the first group to apply to a spot bitcoin ETF.

At that juncture, the SEC might also render decisions on additional filings of a similar nature. Slightly over a dozen firms, BlackRock and Fidelity among them, have submitted applications for spot bitcoin ETFs.

Numerous analysts, including TD Cowen, are optimistic that the SEC will approve spot bitcoin ETFs by the following week.

Reuters reported last week, citing sources, that the SEC could decide whether or not to approve the 14 firms vying to issue a spot bitcoin ETF by this week, before a potential January 10 launch.

In recent months, bitcoin’s price has increased primarily because of mounting optimism that the SEC will approve spot bitcoin exchange-traded funds (ETFs), which are anticipated to attract further institutional investment in the cryptocurrency sector. At present, Bitcoin is valued at approximately $45,000.

Aside from the SEC’s approval of spot bitcoin ETFs, two Republican-led proposals have received considerable attention on the crypto policy front in the past year.

One measure seeks federal regulation of stablecoins, whereas the other takes a holistic approach to the market structure of cryptocurrencies.

Having been approved by the House Financial Services Committee in July under the leadership of Chair Patrick T. McHenry, R-N.C., both measures now require a presentation before the Senate Banking Committee. This task may present difficulties this year.

TD Cowen, however, believes that a deal is still possible during the “lame duck” period that follows an election for a comprehensive crypto market structure law.

The period between an election and the inauguration of a new government is referred to as the “lame duck period.”

TD Cowen reports that McHenry would prefer to complete the task before he retires from Congress in 2024. “To gain the support of the Senate and the White House, the SEC must take the initiative on investor protections,” TD Cowen stated.

Regarding the stablecoin measure, TD Cowen stated that McHenry would revert to it if he could not pass legislation addressing the broader structure of the cryptocurrency market.

TD Cowen said, “We see this as less of a political burden than the structure of the cryptocurrency market,” adding, “However, the level of resistance from Republicans toward Democratic demands will determine the extent of the obstacles.”