Fidelity readies new spot bitcoin ETF filing - report (updated)

Virtu Financial

27/06/2023 15:27

(Adds analyst quotes in paragraphs 5-6, background on bitcoin
ETF filings and regulatory environment in paragraphs 7-14)
    By John McCrank and Niket  Nishant
       June 27 (Reuters) - Asset manager Fidelity is expected
to file with the U.S. securities regulator for a spot bitcoin
exchange-traded fund, joining other big money managers seeking
to launch bitcoin ETFs, the Block reported on Tuesday citing a
source familiar with the matter.
    In the past two weeks, BlackRock  BLK.N , WisdomTree  WT.N ,
Invesco  IVZ.N , VanEck, and Bitwise have filed new applications
with the U.S. Securities and Exchange Commission (SEC) for spot
bitcoin ETFs, sending the price of bitcoin  BTC=  to a more than
one-year high of over $31,000 on June 23.
    Fidelity declined to comment. 
    The Boston-based financial firm is also part of a consortium
that includes market makers Citadel Securities and Virtu
Financial  VIRT.O , retail broker Charles Schwab  SCHW.N , and
venture capital firms Paradigm and Sequoia Capital, which
recently launched a crypto exchange called EDX Markets.    
    "There's a lot of optimism here that you're going to get a
bitcoin ETF," said Edward Moya, senior market analyst at Oanda.
    "If that does get done, it could open the door for much more
institutional money and probably some high-net-worth retail
traders to get back into crypto," he said. 
    Futures-based bitcoin ETFs that track the price of bitcoin
futures contracts have been allowed by regulators since October
2021.  
    But the SEC has in recent years rejected dozens of
applications for spot bitcoin ETFs, which are a publicly traded
investment vehicles that directly track the price of bitcoin,
including one by Fidelity in January 2022, over concerns that
the underlying market could be manipulated.
    The game changer for many people this time around was
BlackRock applying for a spot bitcoin ETF, because it files for
ETFs only when it believes it can get them approved, Moya said.
    The ETF filing has helped reverse negative sentiment in the
bitcoin and broader cryptocurrency markets, after a series of
crypto company meltdowns, including the sudden collapse late
last year of exchange FTX, which authorities allege was running
a multi-billion dollar fraud. 
    More recently, regulatory scrutiny has weighed on the
sector. This month, Binance and Coinbase Global  COIN.O , two of
the biggest crypto exchanges, were sued by the SEC for allegedly
violating its rules, which the pair deny. 
    Investors and speculators view the recent spot bitcoin ETF
filings as a vote of confidence for the crypto space, said Alex
Adelman, chief executive of bitcoin rewards company Lolli,
especially "since institutions like BlackRock and Fidelity
provide the expertise and custodial services top retailers rely
on to serve global consumers."
    Separately, the SEC is itself being sued by Grayscale
Investment over the regulator's rejection of Grayscale's
application to convert its flagship spot Grayscale Bitcoin Trust
 GBTC.PK  into an ETF.
    That case, which could wrap up by the end of summer, hinges
on the SEC having previously approved certain surveillance
agreements to prevent fraud in bitcoin futures-based ETFs, with
Grayscale arguing that the same setup should apply to its spot
fund, since both spot and futures funds rely on bitcoin's price.

 (Reporting by John McCrank in New York and Niket Nishant in
Bengaluru; additional reporting by Hannah Lang in Washington;
Editing by Krishna Chandra Eluri, Michelle Price and Lisa
Shumaker)
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