JP Morgan analysts, under the leadership of Nikolaos Panigirtzoglou, have made a bold prediction regarding Bitcoin exchange-traded funds (ETFs) and the U.S. Securities and Exchange Commission (SEC). Their perspective is based on a recent federal court ruling that went against the SEC in a case involving Grayscale Investments.
The court’s decision criticized the SEC for its “random and irregular” rejection of Grayscale’s proposal to transform its Bitcoin trust into an ETF. The key point here is that the SEC failed to provide a clear explanation for treating futures-based Bitcoin ETFs differently from spot-based Bitcoin ETFs.
JP Morgan’s analysts claim that, in light of this ruling, the SEC may be forced to reconsider its view not only on Grayscale’s request but also on pending spot Bitcoin ETF applications from various firms, including asset management firms like BlackRock, Fidelity Investments, and Invesco. Rejecting these applications now would not only be disruptive but also embarrassing for the SEC, making it an unlikely scenario.
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Recently, the SEC has postponed its decisions on these spot Bitcoin ETFs until at least mid-October, suggesting a simultaneous approval of multiple applications rather than giving a single applicant a first-mover advantage. This could lead to increased competition among ETF providers and potentially force Grayscale to lower its fees if its trust becomes the largest Bitcoin spot ETF.
Despite this positive regulatory momentum, JP Morgan believes that spot Bitcoin ETFs are unlikely to have a profound impact on the broader cryptocurrency and financial industries. Similar products in Canada and Europe have failed to attract significant investor interest, and the recent shift away from gold ETFs did not significantly benefit Bitcoin funds, including futures-based ETFs. JP Morgan expects a similar performance for U.S.-launched ETFs in this regard.
It has been observed that JP Morgan consistently takes a stance in support of cryptocurrencies and advocates for clear regulations in the crypto space. In a report released by Todayq News on June 12, 2023, JP Morgan emphasized the necessity of well-defined crypto regulations, particularly in light of recent SEC lawsuits against Binance and Coinbase. The report underscores the significance of establishing a comprehensive regulatory framework and delineates the roles of both the SEC and CFTC in regulating the crypto industry.