- Hashdex, a cryptocurrency asset management firm, has submitted a new application for a Bitcoin
ETF, employing a unique strategy that challenges the U.S. Securities and Exchange Commission (SEC). - Unlike other applications, Hashdex’s submission does not include a surveillance-sharing agreement with Coinbase, and instead of purchasing Bitcoin directly with cash from exchanges, the company will acquire it via the futures exchange CME.
- Hashdex’s strategy aims to invalidate the SEC’s frequent argument of market manipulation when rejecting spot ETFs by aligning its spot ETF with the CME.
In a strategic move, Hashdex, a crypto asset management firm, has lodged a new Bitcoin ETF application that puts the U.S. Securities and Exchange Commission (SEC) in a tight spot. The company’s unique approach involves acquiring Bitcoin through the CME futures exchange rather than buying it directly with cash from exchanges, and it does not involve a surveillance-sharing agreement with Coinbase, unlike other applications.
A New Approach to Bitcoin ETFs
Hashdex’s strategy revolves around the “Exchange for Physical” (EFP) product on the CME. This process allows for the exchange of a futures contract for a physical asset. For instance, an investor who has previously purchased a futures contract for a certain amount of gold and does not wish to continue the contract upon maturity can execute an EFP transaction, exchanging the futures contract for physical gold. This way, the holder of the futures contract can terminate it and receive physical gold in return.
Targeting the SEC’s Market Manipulation Argument
The SEC has previously approved Bitcoin ETFs based on futures contracts on the CME. The commission also acknowledged that Bitcoin contracts on the CME are part of a regulated market. By associating its spot ETF with the CME, Hashdex aims to nullify the SEC’s frequent argument of market manipulation when rejecting spot ETFs.
Cornering the SEC from Another Angle
Bloomberg ETF analyst James Seyffart expressed that this application puts the SEC and its chairman, Gary Gensler, in a corner from another angle. ETF expert Nate Geraci also praised Hashdex and the NYSE for their excellent move. Tweet Link
SEC Has 240 Days to Make a Decision
If approved, the ETF will be traded on the New York Stock Exchange (NYSE). The SEC has a 240-day period to evaluate the ETF. The commission must make a final decision on the application at the end of this period.
Conclusion
Hashdex’s innovative strategy presents a new challenge to the SEC’s approach to Bitcoin ETFs. By aligning its spot ETF with the CME, the company aims to counter the SEC’s frequent market manipulation argument. This move has been praised by industry experts and puts the SEC in a position where it must carefully consider its decision.
