Amid a surge of Bitcoin ETF applications, the U.S. Securities and Exchange Commission (SEC) has deemed recent proposals, including those from industry giants BlackRock and Fidelity, as inadequate, causing a sharp drop in Bitcoin’s value. This decision contradicts recent analysis stating BlackRock could have a 50% chance of approval, revealing continued regulatory challenges in the cryptocurrency sector.

Over the past two weeks, applications from firms such as BlackRock, Fidelity, Ark Investment Management, Invesco, and WisdomTree, have buoyed Bitcoin’s price, signaling increased competition in the digital asset industry. However, the SEC’s recent stance has triggered a $1,000 plunge in Bitcoin, more than a 3% drop, reinforcing the market’s vulnerability to regulatory news.

According to the Wall Street Journal, the SEC informed Nasdaq and CBOE, the exchanges responsible for filing the ETF paperwork for the asset managers, that the applications lack sufficient clarity and comprehensiveness. The inadequacies primarily relate to the “surveillance-sharing agreements,” including the unclear choice of the spot Bitcoin exchange.

Since 2017, the SEC has persistently rejected similar ETF applications, citing potential market manipulation and fraud as primary concerns. However, despite the regulatory hurdles, the CBOE plans to update and refile their application, demonstrating sustained interest and commitment to fostering a Bitcoin ETF.

The SEC’s decision underscores the crucial role of regulatory clarity in propelling the digital asset industry forward. While ETF approval could create broader opportunities for investors, market participants must navigate the regulatory landscape carefully to mitigate potential risks.