How Is A Bitcoin ETF Approved By The SEC?

As of October 2023, the US Securities and Exchange Commission had yet to approve a spot bitcoin ETF. The article explains the process: an issuer submits an application setting out the fund’s structure, objectives and risks, and the SEC reviews it with a focus on investor protection and market integrity, often over several rounds. A 2018 SEC proposal aimed to replace individual exemptive orders with a single rules-based framework for ETFs meeting standard conditions.

The article lists the main criteria the SEC was expected to weigh for a spot bitcoin fund: custody, market surveillance against manipulation, liquidity and the arbitrage mechanism that keeps an ETF’s price in line with its net asset value. It also covers public comment periods, daily portfolio transparency and custom baskets, and notes that members of Congress had written to Gary Gensler, then SEC Chair, seeking clarity, given that bitcoin futures ETFs had already been approved.