The Race for Bitcoin ETF Approval Heats Up as Franklin Templeton Joins Contenders

Asset management titan Franklin Templeton has entered the high-stakes race to win regulatory approval for a spot bitcoin exchange-traded fund (ETF) in the U.S., joining heavyweight competitors like BlackRock and Fidelity. With $1.5 trillion in assets under management, will Franklin Templeton have what it takes to cross the finish line first in this long and winding battle with the SEC?

The financial services company filed legal paperwork on September 12 outlining its plans to list a bitcoin ETF on Cboe's BZX exchange and utilize CME Group's bitcoin pricing data. Franklin Templeton would rely on crypto exchange Coinbase as custodian for the fund's bitcoin assets, while BNY Mellon would hold its cash reserves. A spokesperson for Franklin Templeton declined to comment on the filing.

An ETF tracks the price of an asset or group of assets, allowing mainstream investors to gain exposure to niche markets within their existing brokerage accounts. A bitcoin ETF would eliminate the need to directly manage crypto wallets and private keys. As Franklin Templeton's filing states, the ETF "offers a convenient means of making an investment similar to bitcoin relative to acquiring, holding and trading bitcoin directly."

While this is Franklin Templeton's inaugural attempt at a spot bitcoin ETF, the company is no stranger to digital assets. They launched an on-chain U.S. government money fund in 2019 and founded a digital asset strategies team the following year. Even so, the mighty SEC has never approved a spot bitcoin ETF despite numerous attempts from Gemini, Bitwise, Grayscale and others over the years.

BlackRock, Fidelity, Invesco, Bitwise, Ark Invest, Wisdom Tree and more are still vying for the coveted approval. The SEC recently postponed decisions on pending bitcoin ETF proposals until October 19th. Will evangelists for decentralized finance finally sway the historically crypto-wary SEC?

Franklin Templeton's last-minute entry comes on the heels of a legal victory for Grayscale Investments against the SEC. The D.C. Circuit Court of Appeals ruled that the SEC wrongly rejected Grayscale's application to convert its bitcoin trust (GBTC) into an ETF. Although the decision doesn't guarantee approval for Grayscale, it means the SEC can no longer deny conversion using past justifications. The judge determined the SEC "failed to explain its different treatment of similar products", calling their rejection of Grayscale's proposal "arbitrary and capricious".

Many industry experts now believe this precedent substantially increases the odds of a bitcoin ETF finally getting the green light. A Bloomberg Intelligence report from August states there is a 95% chance of a U.S. spot bitcoin ETF launching before year-end 2023. Yet questions persist about security, market manipulation, and whether bitcoin is truly ready for primetime.

As Ayn Rand once wrote, "Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter."

"The only outcome of this misguided crypto casino will be more ripped-off investors," warns renowned economist Dr. Armand D'Angelo.

However, longtime blockchain advocate Patricia Moss has a more optimistic perspective. "While risks exist, a spot bitcoin ETF would allow average investors to safely access digital assets and decentralization. This could significantly benefit society."

I believe both sides present valid concerns. Nevertheless, investors obviously hunger for bitcoin exposure through traditional accounts. Denying an ETF on ideological grounds seems counterproductive - better to permit but tightly regulate. Furthermore, decentralization via blockchain intrinsically empowers individuals against corrupt institutions. Though not perfect, bitcoin remains the foremost decentralized store of value worldwide. Reasonable guardrails can mitigate downside risks of a spot ETF while capturing the considerable upside.

The SEC should approve a bitcoin ETF to foster financial inclusion and innovation. With prudent oversight, investors gain access without the SEC condoning bitcoin itself. Regardless, decentralized networks like Bitcoin will continue growing as people increasingly mistrust institutions. The cat is already out of the bag.

Looking ahead, I predict the SEC will finally acquiesce within the next year by either approving a spot ETF or issuing limited disapprovals. Bitcoin exposures, whether via ETFs or direct ownership, will become normalized for retail and institutional investors alike.

This battle parallels the early days of gold ETFs, stock index funds, and gold futures. Despite initial controversy surrounding novelty and risk, these inventions all greatly benefited investors over time. Some issues took decades to resolve, like gold futures manipulation. Nevertheless, approving regulated access provided the best path forward.

The same will likely prove true for bitcoin ETFs. The SEC should allow financial evolution to continue, while crafting thoughtful policies to address legitimate concerns. Suppression often breeds instability and harm.

How will a spot Bitcoin ETF approval open up cryptocurrency to retail investors?

Approving a spot bitcoin ETF would provide easy, regulated cryptocurrency access to millions of new mainstream investors via brokerage accounts. Owning bitcoin directly currently requires navigating decentralized exchanges, wallets, and private keys - a daunting barrier to entry. An ETF wraps bitcoin within a familiar, easy-to-understand security under established investor protections. Allowing simple exposure gives retail investors the option to safely allocate to bitcoin and decentralization.

What are the main arguments around why the SEC should or shouldn't approve a spot Bitcoin ETF?

Arguments against SEC approval cite bitcoin's historical volatility and manipulation risks, questioning whether it's mature enough for an ETF. There are also philosophical objections to endorsing speculative crypto assets. However, an ETF doesn't necessarily endorse bitcoin itself - it simply allows regulated access. Investors clearly want exposure, so denying it seems paternalistic. Reasonable oversight can help mitigate downsides. Arguments for approval cite pent-up investor demand, precedent with other novel ETFs, and the benefits of fostering financial innovation. With prudent regulation, bitcoin's positives can be captured while protecting consumers. However, thoughtful policymaking takes time.