Investment bank TD Cowen has released a research note predicting that the U.S. Securities and Exchange Commission (SEC) will approve a spot bitcoin exchange-traded fund (ETF) by the January 10 deadline, calling it a “political necessity.” The bank's Washington Research Group, led by financial analyst Jaret Seiberg, argues that the SEC needs to solidify its position as the primary crypto regulator before Congress moves forward with comprehensive crypto legislation.
Political Necessity: SEC’s Strategic Move
“To us, this is a political necessity as the agency needs to cement its role as a crypto regulator before Congress consider broader crypto legislation,” the TD Cowen team stated in the note published Tuesday. The bank also noted that the SEC does not want to lose another legal battle over its refusal to approve bitcoin ETFs, referencing its recent defeat in the Grayscale Investments case.
In August 2023, a federal court ruled that the SEC had improperly rejected Grayscale’s application to convert its Bitcoin Trust (GBTC) into a spot ETF, forcing the regulator to reconsider. Since then, the SEC has been under increasing pressure to approve such products, especially after several major asset managers including BlackRock, Fidelity, and Ark Invest filed applications for spot bitcoin ETFs. Ark Invest’s joint application with 21Shares is the first to face a final deadline on January 10.
Congressional Legislation and ETF Outlook
Meanwhile, the U.S. Congress is considering multiple cryptocurrency-related bills. Last year, the House Financial Services Committee passed four digital asset bills: the Financial Innovation and Technology (FIT) for the 21st Century Act, the Blockchain Regulatory Certainty Act, the Clarity for Payment Stablecoins Act, and the Keep Your Coins Act. These bills aim to provide regulatory clarity for the crypto industry, but they also raise questions about the division of oversight between the SEC and other agencies.
TD Cowen believes that a “lame duck” session after the 2024 election could present an opportunity for lawmakers to negotiate a comprehensive crypto market structure bill. To gain support from the Senate and the White House, the SEC must lead on investor protection. Approving a spot bitcoin ETF is seen as a crucial step for the agency to demonstrate its capability and retain regulatory influence.
The broader market expects that an SEC approval would open the floodgates for institutional investment, potentially driving bitcoin prices higher. Analysts caution that while the political calculus favors approval, uncertainties remain, such as the SEC’s concerns over market manipulation and investor protection. Nonetheless, TD Cowen’s report reinforces the view that the SEC will prioritize maintaining control over the crypto space, even if it means reluctantly greenlighting a product it has long resisted.
In conclusion, the investment bank’s analysis highlights the dual pressure of political and legal factors pushing the SEC toward approval. This decision could reshape the crypto investment landscape and set a precedent for global regulators.