Latin America Firm Hashdex Pursues SEC’s Approval for Bitcoin Spot ETF

The leading crypto asset management firm in Latin America, Hashdex, confirmed applying for the Securities and Exchange Commission (SEC) approval for the Bitcoin exchange-traded fund (ETF). The firm indicated it is joining the applicants seeking to secure the elusive permit to offer Bitcoin ETF. 

Hashdex, in a communication conveyed to the media, revealed that it proposes to utilize a regulated exchange rather than rely on surveillance-shared services with Coinbase. The entry expands the list of applications that the investors seeking crypto derivatives hope to approve.

Hashdex Optimistic of Bitcoin ETF Applications 

Hashdex’s announcement portrays the belief that the SEC will relent from its stance to reject and ignore Bitcoin ETF applications for the past decade. The wave of applications began when asset management giant BlackRock submitted a bid in June 2023. The filing triggered an unexpected bullish momentum for Bitcoin. The uptrend grew as more asset management firms showed interest in such investment vehicles.  

The historically high approval rate portrayed by BlackRock in past applications prompted other firms to bid for the spot Bitcoin ETF license. The majority of the applications replicated the approach adopted by BlackRock. In particular, they propose deploying the surveillance-sharing agreement by engaging the crypto exchange giant to avert potential fraud. 

Hashdex to Acquire Spot Bitcoin From CME

Hashdex’s ETF application leverages a unique strategy. It proposes to acquire spot Bitcoin from the Chicago Mercantile Exchange (CME) through the existing Bitcoin futures ETF. 

 A review of the official NYSE Arca 19b-4 filing submitted to the Garry Gensler-led SEC shows that Hashdex seeks to utilize the Exchange for Physical (EFP) transactions. Such is possible in acquiring and disposing of spot Bitcoin rather than relying on transactions on unregulated spot exchanges. The Hashdex approach would assure the regulators that it would avoid price manipulation.

Hashdex Confident to Replicate Brazil’s Approval of Bitcoin ETF

Hashdex indicates that tracking cryptocurrency prices would occur within the tightly regulated market to break reliance on the unregulated crypto market. Although dwarfed by the over $8 trillion assets under BlackRock’s management, Hashdex’s $435 million is equally significant. Besides the portfolio, Hashdex is the pioneer company to unveil crypto index ETFs within Brazil.

Altana Digital Currency Fund founder Alistair Milne indicates that the application is difficult for the SEC to dismiss. He considers the strategy deployed to resolve concerns raised by the SEC over price manipulation. 

Milne observes that the Hashdex approach differs from the surveillance-sharing agreement entered with Coinbase derived from the market surveillance information shared by financial institutions. He acknowledged that most applicants, including VanEck, ARK 21Shares, Wise Origin, Invesco Galaxy, and Valkyrie, would utilize the agreement with Coinbase. 

Hashdex had, in the Friday, August 25 blog post, alleged that Coinbase surveillance strategy was unconvincing. The post argued that the strategy showed little evidence that it would resolve the concerns raised by the SEC. 

Although the strategy proposed by Hashdex is different, it pursues a similar goal. It convinces American regulators to safeguard financial products and derivatives from market manipulation actively. 

Hashdex Bitcoin ETF Application Avoids Coinbase Surveillance Sharing

Bloomberg analyst James Seyffart termed the Hashdex Bitcoin ETF application as unique. He added that the strategy portrays the exclusive execution of the ERP transactions. He described it as swapping futures contracts to realize equivalent spot exposure rather than directly executing cash purchases via the exchanges. 

Seyffart is optimistic that the SEC will approve the Hashdex application, citing the mounting pressure on SEC chair Gensler following the Grayscale lawsuit. Also, additional pressure arises from the Ethereum futures application and integration of the Coinbase surveillance sharing agreement by BlackRock. 

The ETF Store president Nate Geraci and finance lawyer Scott Johnson echoed Milne’s observation that Hashdex’s application involves a distinctive Bitcoin ETF. They indicated that Hashdex’s strategy could alleviate the SEC’s worries regarding the Bitcoin market liquidity and manipulation.

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