SEC under congressional scrutiny as BlackRock’s spot Bitcoin ETF application moves forward

U.S. House Financial Services Committee Chair Patrick McHenry said he would “closely” watch how the Securities and Exchange Commission (SEC) responds to BlackRock’s application for a spot Bitcoin ETF in a June 16 tweet.

McHenry noted that while the decision now rests with SEC Chair Gary Gensler, the financial regulator “must not pick winners and losers based on inconsistent factors.”

The lawmaker’s comment suggests that the SEC would have to explain why it rejected all the previous spot Bitcoin ETF applications from other crypto firms if it approves that of BlackRock.

Considering BlackRock’s status as one of the biggest investment firms in the world and its influence, several crypto community members believe the SEC will be under significant pressure to approve its application.

BlackRock’s ETF application

On June 15, BlackRock applied for a Bitcoin spot ETF. Coinbase Custody would act as the custodian for the digital assets, while the Bank of New York Mellon would hold the ETF’s fiat.

According to its application, the SEC has previously approved unregulated spot exchange-traded products in the commodities and currency markets by relying on the underlying futures market. Thus, “the regulated market of significant size test does not require that the spot bitcoin market be regulated in order for the Commission to approve this proposal.”

SEC has a history of rejecting Bitcoin spot ETFs

The Commission has rejected over 10 spot Bitcoin ETF applications from different firms, including  Ark Invest, 21 Shares, WisdomTree, Fidelity, SkyBridge, Valkyrie Investments, and VanEck.

Additionally, the regulator has frustrated Grayscale Investments’ effort to convert its Bitcoin Trust into a spot ETF. The crypto investment firm is currently challenging the SEC’s decision in court.

In these cases, the Commission has consistently maintained that these firms’ applications failed to comply with certain sections of the Securities Exchange Act and were not designed to prevent fraud and market manipulation or protect investors and public interests.

However, the SEC has approved various Bitcoin futures ETFs since October 2021, including ProShares Bitcoin Strategy (BITO) and Valkyrie Bitcoin Strategy ETF (BTF).

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