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SEC Explores Additional Grounds for Denying Approval of Bitcoin Spot ETFs: Berenberg's Insights

Police & Regulations
Aug 31, 2023 at 12:11 pm

Recent analysis points to the consideration of including Coinbase in spot bitcoin ETFs as a potential element influencing the U.S. Securities and Exchange Commission's (SEC) reevaluation of its rationale for rejecting these ETF applications.

In a recently published research report, Berenberg, a German investment bank, suggests that the SEC is actively exploring alternative explanations to clarify its ongoing denials of spot bitcoin exchange-traded fund (ETF) applications. These fresh viewpoints seem to center around concerns associated with the spot bitcoin market. The report, unveiled on a Wednesday, delves into this perspective in greater detail.

Despite the recent legal victory achieved by Grayscale, which could have increased the likelihood of the SEC approving one or more spot bitcoin ETF applications, as articulated by Mark Palmer and his team of analysts, the SEC may be contemplating different grounds to uphold its denials. This consideration follows a court ruling that directed the SEC to reassess its rejection of Grayscale's initiative to convert the Grayscale Bitcoin Trust (GBTC) into an ETF.

If granted approval, a spot bitcoin ETF has the potential to transform the cryptocurrency landscape by broadening market accessibility for institutional investors. ETFs are renowned for enabling market participants to invest in cryptocurrencies without needing to possess the underlying digital assets directly.

The report underscores that the court's ruling did not obligate the SEC to automatically approve a spot bitcoin ETF. Instead, it urged the regulatory body to reexamine the arguments it had previously used to justify its refusal of Grayscale's application. The SEC also maintains the option to challenge the court's decision through an appeal.

Berenberg's report also highlights a surge in the valuation of stocks associated with the cryptocurrency sector subsequent to Grayscale's legal triumph. Notably, Coinbase (COIN) observed a 14.9% increase in its value, while MicroStrategy (MSTR) witnessed a 10.8% surge.

While acknowledging that the approval of a spot ETF could positively impact bitcoin's trajectory and be beneficial for MicroStrategy, Berenberg puts forth a distinct perspective regarding Coinbase. The bank suggests that the SEC might incorporate Coinbase's potential participation in these ETFs as part of its revised grounds for rejecting such applications.

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