Hashdex Engages in Further Discussions with SEC Regarding Application for a Spot Bitcoin ETF

Hashdex, the asset management firm, has recently engaged in discussions with the U.S. SEC to resolve the regulator’s apprehensions regarding its request for a spot Bitcoin ETF.

Asset management firm Hashdex recently conducted a meeting with the United States Securities and Exchange Commission (SEC) to address the regulator’s concerns regarding its application to permit the Hashdex Bitcoin Futures exchange-traded fund (ETF) to include spot Bitcoin. 

According to an official familiar with the situation, this meeting, attended by six SEC officials, as well as representatives from Hashdex, NYSE Arca, Tidal Financial Group, and the law firm K&L Gates, transpired on October 13. 

During the meeting, Hashdex presented its approach for enabling the trading and retention of spot Bitcoin within the ETF on the Chicago Mercantile Exchange (CME), a platform overseen by the Commodity Futures Trading Commission.

A prominent issue raised by the SEC in explaining its postponement or rejection of spot Bitcoin ETF applications is the absence of regulation. The SEC’s argument traces back to the Futures market, which has oversight from the Chicago Mercantile Exchange (CME), in contrast to the unregulated nature of the spot market.

In response to this challenge, the crypto asset manager Hashdex has devised an ETF that addresses this issue. As outlined in their filing, the ETF will employ a strategy of acquiring physical Bitcoin from CME exchanges instead of spot exchanges. This unique approach sets Hashdex apart from other applicants, as it would not rely on Coinbase for the SSA (surveillance-sharing agreement).

Praising this strategy, Bloomberg ETF analyst James Seyfart described the ETF as unquestionably suitable for SEC approval in a tweet:

“In the event that the SEC finds a way to deny all other #Bitcoin ETFs (not my base case) Hashdex’s application is tailored to every argument SEC has made in the past. I don’t think they’ll be able to deny this one.”

The presentation given to SEC officials in this month’s meeting reveals that the strategy is also grounded in the Commission’s Teucrium Order, which affirms the maturity of the Bitcoin futures market for supporting financial products aiming to track BTC.

Subsequently, the SEC might seek additional details before the initial deadline of November 17, as per the individual familiar with the situation.

If all goes well, Hashdex might even manage to beat BlackRock to launch the first spot Bitcoin ETF.

As BlackRock is regarded as a front-runner in the competition for a spot Bitcoin ETF, any advancements related to it tend to influence the market. This influence was evident during the recent surge in Bitcoin’s value when BlackRock’s ETF application was detected on the clearing house DTCC listing.

According to analysts, “the current consensus view is that the SEC will approve all spot ETFs within three months.”