Valkerie, the latest applicant in a race to receive the first spot BTC ETF, argues that Bitcoin Futures ETFs and Spot Bitcoin ETP proposals are treated differently in the eyes of the SEC.
Valkyrie Funds, a venture capital fund, has joined the increasing ranks of companies striving to launch a spot Bitcoin ETF, marking a significant development in the crypto space. The firm is setting its sights on an ambitious partnership with Coinbase, a leading cryptocurrency exchange, as part of its strategic plans.
Valkyrie revealed its proposal for a fund intended to be listed on Nasdaq last month, signaling its commitment to tap into the burgeoning crypto market. Further strengthening its proposition, the firm recently disclosed a 19b-4 filing dated July 3 from the exchange, identifying Coinbase as its partner for the coveted surveillance-sharing agreement.
Coinbase, a major player in US-based Bitcoin trading, is expected to play a critical role in this agreement. By leveraging a surveillance-sharing agreement with the crypto giant, Valkyrie seeks to monitor a majority of the global spot BTC trading paired with USD:
“The Exchange [Nasdaq] aims to enter into a surveillance-sharing agreement with Coinbase, the operator of the largest United States-based spot trading platform for Bitcoin representing a majority of global spot BTC trading paired with USD.”
Adding another layer to its Bitcoin ETF bid, Valkyrie believes that the logic the U.S. Securities and Exchange Commission used in dealing with Bitcoin Futures ETFs could extend to Spot Bitcoin ETP proposals. The Commission has notably backed proposals in the recent past related to funds primarily dealing with Bitcoin Futures registered under the Securities Act of 1933 rather than the Investment Company Act of 1940.
However, the “Bitcoin Futures market [as] a regulated market a regulated market of significant size as it relates to Bitcoin Futures, [is] an odd tautological truth that is also inconsistent with prior disapproval orders for exchange-traded products (“ETPs”) that would hold actual bitcoin instead of derivatives contracts (“Spot Bitcoin ETPs”) that use the exact same pricing methodology as the Bitcoin Futures.”
Despite previous disapprovals for exchange-traded products (ETPs) holding actual Bitcoin instead of derivatives contracts, the filing argues that the Bitcoin Futures market is a regulated market of significant size. This belief spans both the Bitcoin Futures market and the spot Bitcoin market, potentially justifying the approval of the current proposal:
“How would such an ability to detect attempted manipulation and the utility in sharing that information with the listing exchange apply only to Bitcoin Futures ETFs and not Spot Bitcoin ETPs?”
Valkyrie remains steadfast in its proposal, while others have not been so lucky.
Last week, the Commission denied spot Bitcoin ETFs from its most recent applicants, stating that the applications were not “sufficiently clear and comprehensive.” What it means is that the SEC wants to see how the companies would enter into a “surveillance-sharing agreement” while welcoming revised applications.