Fidelity: second amendment for the Bitcoin ETF

A couple of weeks ago Fidelity Investments had filed a request with the SEC to have its own spot Bitcoin ETF approved, following BlackRock’s similar initiative. 

The SEC had reviewed that application in record time, responding that it was incomplete. 

Yesterday it was revealed that Fidelity then also filed a second amendment to the application for the spot Bitcoin ETF.

UPDATE: @Fidelity filed a 2nd amendment to their spot #Bitcoin application. I couldn’t find anything materially different between the two. The only thing i can find is formatting changes… Which i guess is possible because the SEC is notoriously finicky about formatting? pic.twitter.com/3ZCdzeTXJ5

— James Seyffart (@JSeyff) July 13, 2023

Bitcoin ETF: Fidelity’s second amendment

According to Bloomberg Intelligence analyst James Seyffart, the text of this second amendment would be virtually identical to that of the first application. 

In theory, in the case of merely formal changes this one should also be rejected, on exactly the same grounds as the previous one. 

By contrast, when BlackRock submitted the updated application it incorporated some of the SEC’s concerns, and added information that should clarify the agency’s doubts. 

But the picture since yesterday may have changed. 

Fidelity: the non-issue of securities and the approval of Bitcoin ETFs

Until yesterday, the danger loomed over the crypto markets that many altcoins would be considered securities. 

It was the SEC itself that had defined several dozen cryptocurrencies as such, effectively putting the spot markets at risk of closure, even if only partial. 

However, as of yesterday everything has changed, because a court has finally ruled that cryptocurrencies traded on exchanges cannot be considered investment contracts. 

It is worth remembering that the SEC does not have the legal authority to decide what should be considered as a security and what should not, whereas the courts do, but they must rule on each cryptocurrency individually. 

Yesterday, Judge Analisa Torres of the Southern District Court of New York ruled in the specific SEC vs Ripple case that XRP is not to be considered an unregistered security when sold by third parties on crypto exchanges. 

The thing is, this rule must necessarily apply to other cryptocurrencies as well, and so the SEC is believed to have lost its battle against the exchanges it accused of selling unregistered securities. 

At this point, the climate and environment within which the SEC operates may have completely changed, so it is possible that Fidelity simply hopes that the SEC has become less strict on these issues. 

The future of spot Bitcoin ETFs in the US

Granted that there are already spot Bitcoin ETFs, though not in the United States, it seems rather unlikely that the SEC will now approve an application identical to the one it rejected only a few days ago. 

Rather, it seems more likely that it may eventually approve BlackRock’s, which apparently could provide greater assurance. 

Perhaps Fidelity simply hopes that things have changed, and thus also hopes that the SEC may have changed its mind, but logically that may not be the case. 

However, it is worth noting that for the US market there is no strict need for an ETF from Fidelity, especially in the event that one from BlackRock or others is approved instead. 

The European scenario

By the end of the month, the first authorized Bitcoin ETF should be launched in the EU markets. 

This ETF was supposed to land on the markets as early as twelve months ago, but after the failure of Celsius, resulting in the collapse of the crypto markets, the launch was skipped. 

Now that the markets have recovered, Jacobi Asset Management has finally announced the imminent actual launch of the first Bitcoin ETF in Europe on Euronext Amsterdam with the ticker BCOIN. 

Indeed, according to the manager, demand for this type of investment vehicle has changed since last summer.

It is worth noting that there were already similar derivative products in Europe, but they were ETNs (Exchange Traded Notes), and not real funds (Exchange Traded Funds, ETFs). 

The difference is that those who invest in an ETF own underlying shares of the fund itself, whereas those who invest in ETNs own “only” a debt security, and not the underlying assets.

If the market situation has changed in Europe, it has most likely changed in the US as well, which may also mean that something has changed for the SEC. 

It remains to be seen whether the reassurances presented by BlackRock are deemed sufficient, or whether even the change in the landscape makes it possible to even approve the new Fidelidy application almost identical to the previous one.

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