Approval for the U.S. Spot Bitcoin ETF options might face extended delays in regulatory processes. This could potentially diminish the attractiveness of these products, as industry experts suggest. The Securities and Exchange Commission (SEC) recently granted approval for Spot Bitcoin ETFs, marking a significant moment for the crypto industry. However, despite 10 products being actively traded since January 11, the introduction of options has stalled due to the absence of an established regulatory framework.
Why Is There Be A Delay In Approval For BTC ETF Options?
The delay in options for Bitcoin ETFs arises from the lack of a predefined regulatory process. The SEC oversees technical rule changes, while the Commodity Futures Trading Commission (CFTC) may also require approval given the commodity status of Bitcoin. Furthermore, the CFTC is grappling with jurisdiction and oversight questions related to products associated with Spot Bitcoin ETFs.
Such oversight introduces an additional layer of complexity and potential regulatory challenges. The absence of options poses risk management challenges for significant investors. This potential consequence could discourage their participation and hinder the influx of up to $100 billion into the ETFs, as suggested by analysts.
Yesha Yadav, who works at Vanderbilt University as a law professor, suggested that this hurdle may prompt some major investors to steer clear of the market altogether, according to a Reuters report. Additionally, the delay poses an impediment to the crypto industry’s objective of introducing more innovative crypto products to the market, with regulatory approval acting as a gatekeeper.
John Roglieri, FalconX’s Head of Capital Markets, acknowledged the industry’s desire to expand but highlighted the regulatory landscape as a significant barrier. He said, “The markets really want to go there, but the regulators are the gatekeepers.” Moreover, it’s important to note that this dual regulatory engagement, while not unprecedented, is rare.
When Will Spot Bitcoin ETF Options Be Approved?
The current situation could mirror the extended timeline for the approval of options tied to the SPDR Gold Shares ETF, which took more than three years for CFTC approval. Notably, regulators did not endorse an application for options on platinum and palladium ETFs in 2010. Whilst, Martin Leinweber, a digital asset product strategist, estimates that the approval process might span between two and 10 months.
Although Nasdaq, CBOE, and NYSE Arca sought SEC approval in January to launch options and anticipate listing them later in 2024, the Options Clearing Corporation (OCC), responsible for clearing options, is awaiting CFTC approval.
The OCC is in discussions with regulators regarding the necessary approvals but is refraining from commenting on a potential time frame. Whilst, exchange executives and CFTC officials will meet soon to address the matter.
Adam Sze, Global X’s Head of Digital Assets Product, which withdrew its Spot Bitcoin ETF application, noted that given the decade-long process for SEC approval of Bitcoin ETFs, a delay in options is not surprising. Moreover, he stated, “A few more months for listed options probably isn’t that long in the grand scheme of things.”
