Despite CEO Jamie Dimon’s consistently outspoken skepticism toward crypto, JP Morgan, one of the world’s largest banks, has been quietly making moves in the decentralized finance space. In a dissent from Dimon’s critiques, JP Morgan’s analysts have recently shared an optimistic perspective on the crypto development on everyone’s minds: the U.S. Securities and Exchange Commission’s (SEC) decision on a number of spot Bitcoin ETF filings.
The group of analysts claimed in a research note that the SEC is much more likely to greenlight a spot Bitcoin ETF after a federal court’s Grayscale ETF ruling last week. The ruling against the SEC claiming it rejected Grayscale’s ETF ruling on an arbitrary basis has cast a decidedly rosier outlook on the possibility of incoming Bitcoin ETF approvals. The crown jewel of these being the spot Bitcoin ETF filed by BlackRock, the world’s largest asset manager.
So if JP Morgan analysts believe an approval for BlackRock is inevitable, does everyone in the crypto space share the same sentiment? Not quite. There’s no clear consensus on the future of these ETF filings even when taking recent developments into account, and even less so on how an SEC approval would impact the wider market.
Is JP Morgan right about ETF inevitability?
That depends on who you ask. Crypto experts have made their thoughts known across a wide range of possibilities related to how the SEC will rule. Opinions on the issue also diverge when considering the scope of crypto’s regulatory reality and the historic precedent of SEC decisions.
Eitan Katz, Co-Founder and CEO of Kima, an asset-agnostic, peer-to-peer money transfer and payment protocol stated that “the recent court decision could potentially influence the SEC’s stance, creating a more favorable environment for a spot Bitcoin ETF. However, it remains uncertain to what extent this will impact the SEC’s core considerations of market integrity and investor protection, which have been key concerns in the past.”
The sentiment surrounding market integrity and investor protection also compound changing tides in crypto’s regulatory landscape. 2023 has proven to be a landmark year in advancing global clarity around crypto regulations in many countries. And despite critiques that the U.S. has been aggressively targeting crypto companies, an impending SEC approval could indicate a seismic shift in its approach.
This is echoed by leaders in the DeFi space, with Simon Schaber, Chief Business Development Officer of Spool DAO commenting: “The recent court rulings against the SEC in the Greyscale and Ripple lawsuits may signal a changing regulatory landscape in the crypto industry. Although the ETF decisions are likely to face delays, it might only be a matter of ‘when’ rather than ‘if’ Bitcoin ETFs will receive approval.”
Other experts are more skeptical about JP Morgan’s stance on the matter, however, and point to SEC precedence and market volatility as a contributing factor.
“I have a lot of respect for JP Morgan, the biggest U.S. bank, in taking this position,” says Motti Peer, Chairman and Co-CEO of the award-winning tech PR firm ReBlonde. “But I think the ETF won’t get approved for the reasons the SEC has declined it before. Bitcoin is easily prone to manipulation, so the market is going to be a little disappointed, but then it will recuperate its losses. Once interest rates drop and money becomes cheaper, bitcoin will rise alongside all other assets.”
What could this mean for the wider crypto market?
The debate surrounding the decision also sparks speculation and predictions for what either an approval or denial from the SEC could indicate for the crypto market wholesale. Whether experts agree on the approval being an inevitability, or believe that an endorsement by a key U.S. regulator is still far off, the potential impacts are harder to predict.
Some experts in crypto are confident that the ETF decisions won’t stall the industry’s approach into the traditional financial realm, especially on the institutional level. “Speculation about what the SEC will or won’t do on this specific ETF will not change the fact that institutions are already adopting digital assets and regulatory clarity is proceeding,” says Sigal Biran-Nagar, VP of Marketing at GK8. “As such, we are already seeing traditional institutions investing in the infrastructure required to securely support these assets.”
Others agree that an approval would entice more institutions to enter the crypto space, but not at the pace that enthusiasts expect. Katz adds, “If the SEC were to approve a spot Bitcoin ETF, it could hold significant implications for the crypto market, albeit not immediately.” He also notes that “Whether the SEC becomes convinced that current ETF proposals adequately address market integrity and investor protection remains to be seen.”
Those investor protections also have to keep in mind the differing investor demographics that would use a spot Bitcoin ETF. Peer highlights the differences between what groups would likely benefit from an approval, noting that “A spot ETF will be more appealing to the general public and draw in the ordinary John Smith to crypto. With that in mind, futures ETFs will appeal more to more accredited investor that can allocate risk capital into it.”
Even those that see the potential benefits of the ETF approval being more immediate still note that it will not solve the prevailing issues within the wider crypto ecosystem.
“The approval of Bitcoin spot ETFs would have a significantly positive impact on the industry. Currently, numerous regulatory obstacles worldwide hinder large-scale investment inflows into the crypto space,” adds Schaber, “These hurdles also need to be addressed to attract more significant investments into the market.”
It’s clear that the SEC’s decisions on ETFs, even though they’re now delayed, will continue to create meaningful conversations around both Bitcoin, and crypto’s long-term path. And although the industry’s leaders are far from having a wide consensus, their respective thoughts point to the continued benefits of rooting crypto back into reality in order to flourish.
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