Interpreting the 22-page Bitcoin ETF approval document: SEC's frustration written all over their face
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Interpreting the 22-page Bitcoin ETF approval document: SEC's frustration written all over their face
Packed with risks, yet still meets the conditions stipulated in the Securities Law.
Navigating Web3 tides with focused insightsAuthor: Loopy
Bitcoin spot ETFs have been "approved" too many times already—from Cointelegraph's "intern incident" to the hacking of the SEC's official Twitter account—markets have witnessed numerous false announcements of ETF approvals.
Today, the approval has finally become real.
Yet even the SEC’s official announcement felt oddly reminiscent of “The Boy Who Cried Wolf.” At first, people still refused to believe it, waiting for a final twist.
Shortly after the initial approval, a 22-page PDF began circulating rapidly online. The document stated that 11 bitcoin spot ETFs had been approved. Those who downloaded it claimed they obtained it directly from official SEC channels. However, when others clicked on the link, they were met with a 404 error page.
This meant that just minutes after being published, the document was taken down from the SEC’s official website. Doubt quickly returned—was this another last-minute glitch? Had the ETF really been approved?
Bloomberg ETF analyst James Seyffart commented: "It's nearly certain the SEC did not intend for anyone outside the SEC to access this file/link. I confirmed that I downloaded this document via the SEC’s official website—it is an approval order, and the SEC is expected to republish it shortly."
Soon after, VanEck officially confirmed the approval to media outlets, and only then did the market fully believe it—ETFs are truly here.
Approximately 40 minutes later, the same PDF reappeared on the SEC’s official site under a different URL.
What exactly does this 22-page document reveal? Odaily Planet Daily brings you a summary breakdown.
What Was Approved?
The document lists all 11 approved ETFs:
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Grayscale Bitcoin Trust
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Bitwise Bitcoin ETF
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Hashdex Bitcoin ETF
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iShares Bitcoin Trust
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Valkyrie Bitcoin Fund
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ARK 21 Shares Bitcoin ETF
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Invesco Galaxy Bitcoin ETF
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VanEck Bitcoin Trust
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WisdomTree Bitcoin Fund
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Fidelity Wise Origin Bitcoin Fund
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Franklin Bitcoin ETF
Additionally, the SEC approved rule change proposals submitted by NYSE Arca, Nasdaq, and BZX exchanges. These exchanges have made modifications to their trading rules, including clarifying ETF share structures and trading units, as well as adjustments related to trading hours, volume limits, pricing, monitoring, and disclosure requirements.
Exchanges must ensure that the listing and trading of these products do not create unfair or opaque market conditions and are capable of preventing potential fraud and manipulation.
Is Bitcoin Really "Susceptible to Manipulation"?
The SEC determined that these ETFs can meet the requirements of securities laws, provided that exchange rules are designed to prevent fraud and manipulation. The approved ETFs satisfy these criteria based on several key factors:
Strong Correlation with CME Futures
CME futures are already a regulated product. Therefore, correlation with CME prices is a natural benchmark for validating spot BTC markets. In the approval document, the SEC analyzed price correlations since 2021 between BTC prices on Coinbase and Kraken and CME Bitcoin futures.
The SEC found these spot markets to be "highly correlated" with CME Bitcoin futures. Using hourly data, the correlation was no less than 94.2%; using minute-by-minute data, it was no less than 67.9%.
This implies that if fraudulent or manipulative activity occurs in the spot Bitcoin market, it would likely also affect the futures market—and thus be detectable by CME’s monitoring systems.
Surveillance Sharing and Anti-Manipulation Measures
The exchanges where these ETFs will be listed possess the capability to monitor trading activities in real time and through historical analysis, enabling them to identify unusual trading patterns and potential manipulation.
These exchanges have also established comprehensive surveillance-sharing agreements with regulated markets such as the Chicago Mercantile Exchange (CME). Such arrangements enhance information sharing and improve detection and prevention of potential market manipulation.
Exchanges may implement additional rules to prevent manipulation, such as monitoring suspicious trades, limiting large transactions, and instituting trading halts.
Transparency and Disclosure
The proposals include measures to enhance transparency and disclosure, such as providing real-time pricing of trust shares and units, and disclosing holdings of trust assets. This helps market participants make more informed trading decisions and reduces opportunities for manipulation.
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Exchanges will disseminate quotes and last-sale information for each trust via the Securities Information Processor (SIP);
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Each trust will publish its intraday indicative value (IIV) and net asset value (NAV) on its website;
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Exchanges will update IIV every 15 seconds during normal trading hours;
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Exchanges will maintain surveillance programs and have access to information regarding trust share trading;
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Exchanges will establish conditions for trading suspensions and halts;
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Requirements for designated market makers for each trust.
The issuance and trading of trust shares and units must comply with all applicable securities regulations, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws aim to protect investors from fraud and manipulation.
Investor Protection Measures
The proposals also include investor protection measures, such as ensuring fair and transparent trading of trust shares and units, and providing necessary information so investors can make informed decisions.
As the regulator, the SEC conducted a thorough review of the proposed rule changes to ensure they meet standards for preventing fraud and manipulation.
Based on the above considerations, the SEC concluded that the proposed rule changes satisfy the requirements of the Securities Exchange Act, establishing effective mechanisms to prevent fraud and manipulation, thereby protecting investors and the public interest. This review process ensures that exchanges provide a secure and fair market environment when listing and trading Bitcoin-related products.
The SEC Considered Public Comments
The document notes that the Commission also reviewed public comments regarding Bitcoin ETPs.
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Some commenters argued that the Commission must approve these proposals because CME Bitcoin futures are already traded on other national securities exchanges. Since spot Bitcoin ETFs ultimately track the same underlying asset as CME Bitcoin futures, the Commission should approve these applications.
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Other commenters supported approval on investor protection grounds, stating that spot Bitcoin ETPs would offer investors a lower-cost, more efficient way to gain Bitcoin exposure—more convenient and safer than holding Bitcoin directly, and subject to greater regulatory oversight.
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Conversely, some commenters urged the SEC to reject the proposals on investor protection grounds, warning that certain market participants might exploit retail investors.
The document acknowledges these concerns. However, under the Securities Act, the SEC concluded that the proposals meet legal requirements and therefore must be approved.
Are These ETF Products Safe?
The document also addresses the SEC’s concerns about security—including both blockchain-level risks and whether custodians can properly safeguard assets.
Blockchain Security
The document notes that Bitcoin’s decentralized nature and cryptographic technology provide a certain level of security, but also carry risks of hacking.
Despite these risks, some commenters highlighted the advantage of Bitcoin’s blockchain transparency, which allows real-time tracking of the trusts’ Bitcoin holdings.
Double-Spending Risk
Some commenters expressed concern about “reverse-hack” attacks—manipulating the blockchain to alter transaction records and thereby affecting the ETF’s asset value.
How Does the SEC View This?
The SEC acknowledged these concerns in the document, stating that while it considered these risks, it concluded the proposals meet the requirements of the Securities Act and thus adequately protect investors and the public interest.
Is BTC Custody Reliable?
The document states that the ETFs’ Bitcoin holdings are held by custodians rather than being directly owned. This structure introduces risk—if custodial security measures are inadequate, Bitcoin could be stolen.
The SEC acknowledged that custodians may introduce risks to the product. However, as with previous issues, the SEC stated: “If a proposal meets the requirements of the Securities Act, the Commission must approve it.”
Another custody-related risk is “uncovered” assets. If the trust issues shares without sufficient Bitcoin backing, it could result in an uncovered position, potentially causing losses for investors.
The SEC noted that uncovered positions represent a risk common to all ETPs, not just those holding Bitcoin. Any such issue could constitute a violation warranting delisting, and may also breach the Securities Act or Commodity Exchange Act.
Conclusion
Based on the representations and descriptions in the amended filings submitted by each exchange, and following careful evaluation as discussed above—including the Commission’s correlation analysis—the Commission finds, pursuant to Section 19(b)(2) of the Securities Exchange Act, that the proposals comply with the provisions of the Act and the rules and regulations applicable to national securities exchanges, particularly Sections 6(b)(5) and 11A(a)(1)(C)(iii). Accordingly, pursuant to Section 19(b)(2) of the Securities Exchange Act, the following proposals are hereby approved (SR-NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-NYSEARCA-2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-CboeBZX-2023-044; SR-CboeBZX-2023-072), and such approval is hereby accelerated.—Issued by the Commission
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